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What will a 20 minute bank insurance product sale cost you

It is horses for courses, the saying goes. Conventional wisdom is that after spending many exhausting hours going through all the information required to apply for a home loan the consumer is exhausted, and wishes simply to leave the chamber of horrors that the plush interview-room has become. For many people any review of their financial affairs leaves them anxious, and they need a good meal and a drink to recover from it.

Monday, March 19th 2012, 4:00PM

by Russell Hutchinson

That means that although this interview represents the best opportunity known to humanity to sell insurance, there isn't much time to raise the subject before the client's eyes glaze over - or worse - and they simply cannot take any more, running screaming from the bank.

But a substantial number do something else.

What they seem to do is keep signing. What's this? An application for insurance - just hand it here, I'll sign. Oh the price sounds reasonable enough, are we done now?

The challenge with these ‘fast' risk sales is that because of the reduced underwriting associated with them they must have different terms to the more comprehensive insurance product that is offered - often by the very same company - were you buying from, say, one of their insurance managers or financial advisers.  If you ask fewer questions then you need to make up for that in your experience some other way. One way is to charge more, which is why many ‘direct' offers actually cost more than intermediated offers. Another way is to offer less cover, which is done by limited the cover amount, duration, and increasing the number of exclusions. That's the approach taken by several banks with their standard loan protection packages.

Things excluding can be: any disease or accident that occurred first outside New Zealand, HIV, sexually transmitted disease, unlawful acts, and being intoxicated.

It creates some fabulous opportunities for advisers wishing to focus on clients with such limited cover. It creates problems for banks if you think about the demands of an advice model - to what extent do they need to give loan clients the option of following a full advice process in order to meet their commitments under Code Standard 1?

« Caring comes before knowingTime to promote a new social norm for life insurance »

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