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A cure for under-insurance?

Monday, May 5th 2008, 9:31PM 21 Comments

by Philip Macalister

Out in adviser land there are plenty of changes quietly going. I’m not talking about regulation here. Rather there seems to be plenty of movement going on amongst the different disciplines of advice. What I refer to here are mortgage broking, insurance and investment advice. There is no doubt that the former and latter are really struggling. With such a massive slowdown in the housing market the easy deals for mortgage brokers have disappeared. The staple diet of brokering a deal and collecting commissions is disappearing. (Partly because there are far fewer house sales than a year ago, but also because banks have slashed commissions). Now brokers have to look to new income streams and become more advice orientated. There are a number of options brokers can look to for new income and these include advising on home equity release, commercial lending or life insurance. The HER market has slowed, but has a good future. The commercial business is quite specialised, but still a healthy market. What is interesting is that a great debate is developing as to whether mortgage brokers can become risk advisers. I give credit to some of the life companies, such as AIG and Sovereign, for trying to help brokers expand their businesses. On the other hand there are plenty of voices which suggest it will be very hard for brokers to make the shift successfully. This is something which we will watch closely. Added to that though is news that a number of investment advisers, who have experience with life insurance, are moving back to the risk fold. There are stories that risk advisers who sold Blue Chip are now back in the life insurance market. (This comes from a life company itself). It’s all great news for life companies as they may get to write lots of new business. Also it may go some way towards this much-talked about problem of under-insurance.
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Comments from our readers

On 5 May 2008 at 9:50 pm Sharon T said:

<p>Where there is snake-oil, there is a salesman. And what of the 10,000 real estate agents that are looking to exit the industry? What will they sell? Insurance - the ideal market to now sell Income Protection etc on the incomes of those they sold over-priced houses too!!!</p>

On 6 May 2008 at 12:28 am Peanut H said:
Where there is snake-oil, there is a salesman and saleswoman thank you Sharon T.
On 6 May 2008 at 8:49 am Philip said:

Yes there will be plenty of real estate agents looking for work. Indeed one person I spoke to was saying that a third of agents will be out of work by the end of the year. It will be a long, cold winter for many people in all sectors of financial services.

Will real estate agents sell life insurance? I don't think so.

One thing which we see plenty of, and it's happened for years, is one group of people calling other groups names. Look there are plenty of people who do a good job providing advice in real estate, life insurance, mortgages and investments. Equally in each of these areas there are people driven solely by commissions and brokerage.

For financial planners and investment advisers to be calling risk advisers and mortgage brokers is a bit rich - especially at the moment.

Let's work to raise the standards across all these areas and earn some credibility with the public.

On 8 May 2008 at 8:35 am Majella said:
Sharon T - what a crock! If an un-employed real estate salesperson figures that they can simply "switch" to insurance sales, they'll quickly find that it is an industry that, in which to be even moderately successful, demands an entirely different set of skills, and modus operandi.

And to refer to insurance as "snake oil" is almost as deeply un-informed as the rest of your comment.
On 8 May 2008 at 8:40 am Ed said:
Maybe more advisers in the life insurance industry pushing product is exactly what we don't need.
Maybe what we need are insurance companies that offer simpler products that are easy for average punters to understand and which don't require so much advice. And maybe if these simpler products were made available directly, then we'd start to address under-insurance??
On 8 May 2008 at 3:26 pm Leonie said:

I personally am very annoyed with Sovereign and AIG for encouraging mortgage brokers to sell Life. On the one hand they encourage us to give quality advice and attend compliance training and on the other they develop short form applications designed to get quick business, clearly without any needs analysis. What about those of us who genuinely do a good job and take the time with our clients? I won't write for these two companies while they show no loyalty to me.

On 8 May 2008 at 4:39 pm Paul said:

As a mortgage broker who sells risk insurance (and worked for over 20 years in the insurance industry), I think it is sad that the old-fashioned risk advisers are up in arms about someone else entering their patch. I doubt it has much to do with quality and compliance and everything to do with fear of the competition. Sorry, you don't have it all your own way anymore. I think it is quite precious of risk brokers to say they spend three hours with their clients and they are specialists, etc and mortgage brokers are really just hit and run, who shouldn't be involved.

I think those same people might be surprised at just how deep we do delve. We have an instant advantage, for example, of seeing every transaction on their bank statements for the last three months, and we know what their future plans are. I would be surprised if Leonie sees that in detail and whether her clients are quite as open as maybe a mortgage customer is to their broker (who has 100% access to everything anyway). I suggest people just get on with it and embrace the competition. Those that can do mortgages and insurances successfully are to be embraced and likewise, good risk brokers can keep doing their thing.

On 8 May 2008 at 10:27 pm Sharon T said:

Well Majella, it seems that everyone is cross-selling. Are you scared of the competition? As i said, if there is something to be sold, a salesman (or woman) will sell it. Only a fool will not diversify - a basic business practice is to seek new sources of revenue/product. By the sounds of it, your attitude will leave you behind. And in terms of consumer protection - isn't that what the RFPP is about? What I stated was of course a crude example, but I am sure many RE's will look to move into the finance sector - they can't all sell Kirby vacuums in a recession. Broaden those shoulders and accept you will have competition - even from those selling snake-oil.

On 9 May 2008 at 8:48 am Majella said:

Sharon T - You seem to believe you have a deep psychic insight into me & AMP. My business based on my simple comment that, to be SUCCESSFUL in risk sales, a new entrant will have to develop new skills, and that I responded to your "snake-oil" remark as crude and ignorant.

Did I mention consumer protection? Did I mention competition? No.

I would however observe that someone not cracking it in real estate is likely to be equally unsuccessful in risk sales. I'm not sure which industry you're currently foundering in, but to disguise the scrambling desperation implicit in your remarks as "diversifying" doesn't wash.

On 9 May 2008 at 8:55 am Kevin Entwisle said:
I resent that so many are referring to insurance and snake-oil in the same context, I even have trouble in making comment here.

Insurance is a valuable and needed product. The advisers I know out there do a good job in matching clients' needs to appropriate cover.

We are accountable.

Insurance is money to clients when they are truly in need. That's why I am in the business. It is an honourable business. Sling off if you like at those who may come and go, but do not utter snake-oil and insurance in the same context. Just like oil and gold, they don't mix.

On 9 May 2008 at 10:44 am Lee said:

In response to Leonie's comment regarding AIG and Sovereign encouraging mortgage brokers to sell some kind of "short form" of personal risk cover; Her comments could not be further from the truth - I have attended many training sessions with both of these insurance companies - one I attended only yesterday - and certainly the Rep from AIG couldn't be more clear about us completing a full "needs analysis", taking information and properly preparing quotes and options ALL for client sign off for decline or acceptance.

Further as Paul says above, we have already met with the client on a number of occasions by the time we reach the point of completing a needs analysis for personal risk cover, and we have by then completed their mortgage requirements and studied at length their account conduct, their statement of position, the way they earn their income/s etc.

Often we have visited their home and met their families, and work with their other associates i.e. solicitor, accountant etc. We even fax to the solicitor completion of needs analysis with the client sign off at every point - so that the solicitor or anyone else cannot come back and accuse us of NOT offering all the options and combinations.

I personally have spent, hours, days, weeks and even months establishing the clients' needs and wants regarding mortgage and risk requirements, and would suggest as Paul does above that we as mortgage brokers know our clients much better than Leonie would suggest. Further we disclose to the client at the very initial interview our skills, background, accreditations, PI cover and so on, so as to give the client every assurance that we have the skills and the back-up to attend to their needs.

Much care and time has been taken with developing a clear process for the client to understand everything that is presented to them for sign-off within our franchise group. I would then thank Leonie for making sure that she understands the mortgage broker process before publicly criticising and defaming it. Thanks Lee

On 9 May 2008 at 6:49 pm Sharon T said:
apologies for any confusion.i was not being derogatory towards genuine sales people who do have the industry at heart. my comment was more towards where RE's would end up - likely in an industry wih low barriers to entry. Insurance was just a convenient topic raised on the blog. i know many insurance brokers, mortgage brokers, and the like, so do not lump them all in the same category. what i detest is those getting into an industry looking for easy money without the care of a clients best interests.
On 10 May 2008 at 4:48 pm Simone said:
Gosh, if you were my children I think I'd knock all of your heads together (although that probably isn't politically correct today either)...
As an ex successful Mobile Mortgage Manager, ex successful Real Estate Agent and ex successful Mortgage Broker with a high conversion of referrals to insurance (if that gains me any credibility in the insurance arena) and as a current Professional Coach, part of the number one patten to success I share is to teach people like yourselves how to concentrate your energy in to the ONLY area you have control... and that area is YOU, concentrating on you and what you do and to not allow yourself to be distracted by areas of concern (eg. competition) where you have no ability to change the outcome, you may be able to have an influence on it but at the end of the day it is outside of your control and any time and energy you choose to spend on areas of concern is simply choosing to neglect spending precious time and energy on the number two success patten which is to engage in dollar productive activities in enough amounts to generate enough leads to meet your targets...
One of the most effective dollar productive activities is to constantly engage in building quality relationships... with anyone and everyone... Unfortunately your picking and poking of one another above hardly reflects professionals who have a primary focus around maximising opportunities to "engage in Building Quality Relationships".
I'm sure you'll all slap me back with some great responses of how wrong I am and that you do indeed value everyones opinion and that you absolutely are committed to building quality relationships... which is great, I'm sure you are, and I am absolutely certain you all engage in building quality relationships especially with your clients, or else none of you would survive during these harsh times...
So, in line with Sharon's last three words "clients best interests" let me just remind you of that small point (and re-iterate Paul's comments), whilst protecting your exclusive right to your industry and attempting to protect your diminishing income (through no fault of your own ofcourse) YOUR CLIENTS MAY WANT ONE TRUSTED ADVISOR...
So Sharon please don't waste your energy on detesting 10,000 good people that you DO NOT know nor do you know their intentions (I think most of the 10,000 Real Estate Agents you're talking of will be leaving their own industry with a very real experience that will have taught them there is no such thing as EASY MONEY) and perhaps put your energy in to asking your clients what it is they want, what are your clients best interests, as you so rightly pointed out.
Have any of you asked your client base before attempting to close in and decide that no-one could possibly do as thorough a job especially if they are also to do a thorough job in another part of the process with the same client...?
If any of us are going to survive in business we all know that the ONLY thing that really matters is what the client wants and I can tell you they LOVE the one stop shop.
Believe it or not we are all a darn nuisance to the average customer, they want to sell/buy/protect their property and if they had an Option B that allowed them to go to bed one night and wake up the next morning and the whole process be complete WITHOUT having to deal with any of you they would all tick Option B. So, with the Option B just mentioned not being possible let's imagine Option B actually offers them the opportunity to build quality relationships with just 2 professionals to see them through the whole process instead of maybe 3 or 4 professionals. Most would still tick Option B, unless every single professional had done such a great job in the past the clients loyalty would be so that you wouldn't be able to shift them to Option B. Whilst Option B is still not the ultimate I know that it is appealing to most customers compared to the old style Real Estate Agent, Mortgage Broker, Insurance Adviser... how can I be so sure?
Whislt operating as a Real Estate Agent I couldn't help but talk to people about their finance needs as this impacted significantly on the success of my achieving their Real Estate objective and I had real experience and knowledge in lending that added tremendous value to my Real Estate clients decision making process. Innevitably I could complete the whole mortgage broking consultation with my buyers and sellers if they WANTED me to. I would then offer to simply leave them with the knowledge and their current banking relationship or offer to refer them to one of NZ's best brokers (my old boss at the bank, now brokering). Basically they would end up only having to work with ME to get through the whole process, and they LOVED it.
We investigated the legalities of me becoming an accredited NZMBA broker at the same time as operating in Real Estate, whilst there was nothing to say I couldn't it was a very grey area and it was recommended that I didn't due to the risks involved in me having conflicting interests (..?..).
I never could quite get my head around what was conflicting about having my clients wants/needs as my absolute top priority and delivering them more through exceeding their expectations, saving them time and money, getting them a positive result and providing them with a HIGH LEVEL TRUST relationship?
At the end of the day those that WANTED (just under 90% of all my Real Estate clients) to take advantage of the knowledge I had (for free) and who were happy for me to do the extra running around for them, LOVED it, and on leaving Real Estate and going in to a business partnership with my ex boss/now broker they are all still mortgage broking clients today who still ask if I'd help them sell their house privately even though I'm no longer in Real Estate...
Why did they and do they want to do business this way, they WANT me, they WANT to trust the professionals involved in their personal business, they WANT simplicity and they WANT quality relationships.
Did they do it so that I could clip the ticket both sides - no way, they hardly knew me, this was their property, their mortgage... their insurance, they didn't make their decisions based on what I might be able to earn, I always disclosed the referral fee I would earn through the mortgage broker relationship and they never cared.
They chose to work with me because I took the time to show I GENUINELY cared about them and they TRUSTED me.
They chose to work with me because I always re-iterated they were under no obligation to do so.
They chose to work with me on deciding for themselves what was BEST for them, what was EASIEST for them and what FELT right for them.
As I'm sure your clients do when choosing you.
(These days mind you I do get calls from past clients specifically to see if they do this or that will I still get paid because if I wouldn't they may choose to go elsewhere because they were only going to remain loyal to make sure I gained the benefit... naturally whether I would or wouldn't get paid I assist them in making the right decision for them irrelevant of what's in it for me! and that's why they always come back!).
Enough of my lecturing... just check out what YOUR customers might like, you may find all sorts of opportunities to secure your current relationship with them for life.
If any of what I've shared interests you... keep an eye out for our new website to be launched in July full of pattens to help YOU gain even greater success within your business through all that I've mentioned above and MORE...

(I didn't mean for this to be an advertorial it is just stuff I too am very passionate about!)
On 14 May 2008 at 9:32 am Majella said:
Sharon T - I can't tell what you actually DO, but there's no such thing as "easy money" in the insurance industry - at least, not any more. I entered insurance sales in 1992 and the easy money days were, relatively speaking, already over then, compared to the products and practices that had gone before. Still, from the perspective of today's environment, the early 90s were a long hot summer.
You suggested I should "broaden those shoulders and accept you will have competition - even from those selling snake-oil". Well, I have no problem with competition per se. I do however have an issue with quick, in-out, telemarketed sales forces (such as Stone & Associates) that do such an appalling job for the majority of their sales targets/policy holders (I hesitate to call them "clients") and who thereby tar us all with the same brush. And it is organisations like S&A that will suck up the underemployed in other sales-based industries.....and spit them out later.
On 16 May 2008 at 6:32 pm Sharon T said:
Majella, i am only a consumer with an interest in my finances. i am concerned at the plethora of salespeople who can sell me an entire package -i question how they can know so much about everything when one usually dedicates themselves to one cause. i also question how easy it is for these people who move about selling one thing because its 'hot' and then when the market dives they move elsewhere to sell something else the public is clamouring for.
you may care to reflect back a few years when there was no such thing as mortgage brokers, then suddenly when it was seen that you could make a few bob by submitting an application to a bank everyone was at it. now the public has woken up and found for mums and dads it is just as easy to go to the bank why should they bear the cost of a broker. bnz soon woke up to it.
as i alluded earlier, real estate is full of snake-oil salesman in a cartel, they thrive on selling for commission - so it is logical for them to turn to another product in an industry with low barriers to entry and utilise thier database. if you can't see that then i don't know what you are doing in sales.
and you answered everything by your comments about S&A - this is exactly where i am coming from. and you are right - it does no-one any good.
On 20 May 2008 at 9:06 am Majella said:
Sharon T - you're quite right. I see we're actually "on the same page". I am in insurance sales and have been since 1991. I know what I've had to do to develop the skills (and must continue to develop) I now utilise in giving my clients and prospective clients the highest quality advice - in the case of those prospects it is quite often that they are already well served. Outfits like S&A (now owned by AXA NZ) are failures as evidenced b how quickly S&A is shrinking. Their model - sell and duck - doesn't do "the business" - which is to develop long-term trust relationships.

In the end, the public will determine how it accesses these products, but it IS clearly an advice process that they want - as evidenced by the number of "web-based" insurance sales outfits that have come .... and gone.
On 21 May 2008 at 11:09 pm Ed said:
I'm not sure where you've sourced your information regarding how people want to access life insurance products Majella, but I need to point out there is an entire generation of young adults in their late twenty's and thirty's that are very happy to get online and manage their own affairs. And in the next 10 years we'll see Gen Y come into the life insurance market and these people have never known life without mobile phones, i-Tunes, Google, chat rooms, internet banking, online ticketing, YouTube, TradeMe... the list goes on. For this generation, web-based life insurance will be a perfectly natural purchase. The only reason some consumers need advice is because insurance companies have overcomplicated their products and because their old-fashioned distribution methods appeal to older audiences. You underestimate the new, younger, smart, internet-savvy consumer and you overestimate the need for advice at your peril. There are several new on-line life insurance websites, some run by brokers and one by a life insurer that are busy gaining momentum and are well placed to ride the new consumer wave. I absolutely agree with your last point though " In the end, the public will determine how it accesses these products".
On 23 May 2008 at 10:11 am Majella said:
Ed - Yes, I'm quite aware of the internet savvy Gen Y...and is Z next? I have 3 sons all in that very space. I utilise technology in client relationship management and communications to (I'm not THAT old!)
I guess I should have qualified my remarks to the effect that life insurance is a product that is more sold than bought - that is, it is not a product people decide they need to have and undertake a purchasing process. The first time most people even think about insurance is when they borrow money, and the bank makes a sales pitch (to some extent implying that the lending approval is dependent on it).
Given the identified level of under-insurance in this country, there's room for plenty more sources and access options.
On 24 July 2008 at 4:10 pm Hamish said:
I am a mortgage broker and had panicked previously about the market so started getting into selling risk insurances.

However I found that it requires a lot of time and expertise to sell the right kind of risk products. By this I don't mean something which the client can use in a better way but something that the competition can not move.

I have since started referring my risk sales to someone who is more involved in the industry. I think as an independent mortgage broker what sets me apart from the other institution type lender is that I am specialist, I spend all my time doing a lot of loans, so I know a lot about getting a lending deal together.

I could sell risk myself but I would not be as finely tuned as I am now and I would become the same as any banker who sets up ap's as well as selling life as well as setting up cheque accounts.
On 1 December 2009 at 7:23 am Jack Mender said:
It seems like business is still getting hit hard. Is anybody seeing an upswing in their respective niches? Health reform seems like a mess. I generate long term care insurance leads and annuity leads for the insurance industry, but volume has been terrible in the last two months. I am afraid the worst is yet to come, but maybe it is just my attitude.
On 3 December 2010 at 3:49 pm Life Insurance Alabama said:
While I agree that the housing industry is at an all-time low, I still don't think that mortgage brokers are qualified enough to sell insurance. We need to keep in mind that insurance is a complicated matter, which requires the knowledge and skills of an expert this field.
Commenting is closed



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