Joined up thinking to reduce the mortgage protection gap

clock • 3 min read

Budget airlines have had a fair amount of stick for some of their online booking processes, but they've definitely got some things right writes IRESS' Andrew Simon.

They have been criticised over the years for a ‘drip pricing' approach that used low headline prices to lure in customers who would then find themselves automatically paying extra fees and surcharges for extras they didn't necessarily want or need, such as insurance or additional baggage.

This poor practice meant customers would have to deselect the options that weren't applicable.

Some still do this, but the majority now have much more transparent processes that simply present tick boxes as options that customers can select if they need the additional element.

It's a simple solution where a single source of relevant data entry really enhances a process - as long as the systems are joined up.

It's useful as well as transparent, especially for customers who might want the extra baggage allowances and insurance - but would like the costs presented in addition to the primary flight cost.

The insurance and extra baggage costs then become optional extra prompts that get them thinking about potential products and services. It's basic behavioural nudge stuff.

There's a lesson here for other industries. That includes the mortgage sector, where brokers are under pressure in a busy market, with clients focussed on the immediate future and securing the home of their choice.

Mortgage brokers, in this time sensitive market, may struggle to ensure that their clients have the right protection cover in place.

Taking out a mortgage is a huge financial responsibility - arguably the single biggest financial commitment anyone is likely to make.

Yet it remains a challenge to engage consumers with the harsh reality that if they don't have adequate protection in place to cover the mortgage, they could be at risk of losing their home if they were unable to work.

Worse still, they could be leaving a partner with the burden of a debt they're unable to pay in the event of the other partner's death.

It's essential to take a long-term view to be prepared for every life eventuality, which is why taking out suitable protection at the same time as a mortgage should be a no-brainer.

However, far too few people are taking out protection linked to their mortgage purchase.

Exactly half of mortgage holders in the UK have no life insurance in place and just a fifth have critical illness cover, according to research published in June by Scottish Widows.

While there are numerous reasons for this, mortgage brokers are in a great position to help improve matters.

That they aren't always able to do so is due partly to disjointed processes and a reliance on technology systems that don't speak to each other.

This is where better technology driven processes could come in. A protection sourcing system that's connected to the mortgage process should make it quicker and easier to find solutions without having to provide all the information again.

This, I am told by many advisers, is where the protection requirements sometimes slip through the cracks.

A joint mortgage and protection sourcing system that enables single fact-find data capture, multiple product sourcing and total cost summary along with automated creation and storage of KFDs and provider documents would certainly help busy mortgage brokers engage their clients with all of the ancillary needs and could go some way to reducing the mortgage protection gap.

Smart technology and functionality that links processes together allows intermediaries to efficiently research, recommend and apply for a fully protected mortgage on behalf of their clients.

The end result is a streamlined end-to-end mortgage sales journey that ensures intermediaries can efficiently meet the protection needs of their clients as part of a fully integrated process. 

Andrew Simon is executive general manager product, UK at IRESS

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