Julie Botha, Head of Adviser Development, Vitality
Most people favour immediate gratification over longer term gain, so the latest revelations that home buyers are prioritising furnishings and décor over protection insurance isn't entirely surprising.
According to the research, only 15% of homebuyers consider protection a top priority, ranking in last place behind new furniture (36%), décor (26%) or a new kitchen or bathroom (25%)[1].
Even though it may be more sensible to prioritise financial protection that secures the home and other bills should the unexpected happen, buying a new sofa or kitchen offers an instant hit of satisfaction – something tangible you can enjoy straight away.
Concerningly though, the same research found that over half of mortgage holders wouldn't be able to maintain their repayments for longer than six months if their income stopped.
Prioritising protection
At a time when household finances are still tight and the cost of buying a home is high, many clients will struggle to choose between the things that feel immediately more important – home improvements, bills, childcare etc – and the intangible benefit of insurance.
Your clients are also probably thinking more about the excitement of moving in, than what might happen if they fell ill or passed away.
But as a mortgage is the biggest financial commitment and liability most people will take on during their life, it's crucial that protection is part of the conversation.
It's also important we consider the expectations from the regulator around Consumer Duty and the need to avoid foreseeable harm and deliver good client outcomes. What could be more harmful than your client losing their house for the sake of a conversation around the value of protection insurance.
Approaching protection with the client
If many clients are naturally resistant to taking out cover because of unconscious behavioural biases that mean people naturally gravitate towards short term wins like décor and renovations, how can you approach these conversations differently and make protection more of a priority?
An initial stumbling block could be introducing protection at the end of the mortgage discussion. This can make the client feel like it's an afterthought, not as important as the mortgage, or an upsell, invoking persuasion resistance – that feeling we get when we think someone is trying to sell us something.
By mentioning protection upfront and at relevant times throughout, it will feel like a natural part of the mortgage conversation, no different to conversations around buildings and contents insurance.
Exploratory questions like ‘why did you choose to live in this area?' or ‘would you like to leave the house to your children one day?' can also help the client to articulate how important the property is to them. This can shift the emphasis from merely protecting the ‘bricks and mortar' to the home, the people in it and the client's long-term goals and aspirations.
A further line of questioning may be to probe the client on scenarios like ‘if your income paused for a while, which bills would you need covered first to keep the roof over your head?'. A powerful question to ask is also ‘what outgoings don't you need to cover, so we can focus on what matters most?'. This shows empathy for affordability but also isn't an easy question to answer – highlighting what they'll lose out on without financial protection.
Reframing the conversation
We can also think about how to frame protection within the conversation and the context around it. Framing encourages the client to see things from a certain perspective and can help to overcome psychological barriers.
You might for example replace the word mortgage with debt, which is ultimately what it is. Until the mortgage is fully paid off, the client is indebted to the lender and doesn't fully own the property.
A question to the client might be ‘who owns your house?' or ‘why do you think the lender insists on buildings insurance?'. Framing the mortgage in this way can completely change how the client sees it, prompting the realisation that financial protection will secure the property for them and their loved ones, not just the bank.
When presenting protection recommendations to the client, you can also use framing and cost positioning in a way that puts the value of cover in perspective.
As part of any mortgage fact-find you'll have already captured most of the client's monthly outgoings, so have plenty to compare the cost of protection insurance against. How much is the client spending on streaming subscriptions or a phone contract, alongside their monthly mortgage repayments – how much are they willing to spend to protect all of those costs and keep a roof over their head?
So, by making protection insurance a core part of the mortgage advice process and reframing the conversation, we can help more homeowners prioritise products like Life, Serious Illness Cover and Income Protection – all whilst maintaining the home they've worked so hard to acquire.
[1] Research carried out by Opinium on behalf of Vitality with 2,000 homeowners with a mortgage between 17-26 October.
