Insurance -- Take cover

Brokers have been quick to realise that insurance sits comfortably alongside their core residential mortgage offering – not only strengthening the client relationship, but adding a much needed layer to their bottom line.

Chris Burns, group managing director of Money Advisers, says selling insurance products is a sure fire way for brokers to boost flagging mortgage-based commissions.

“We’ve done the numbers and brokers are looking at around a 28 per cent reduction in income as a result of commission changes,” he says.

“By incorporating insurance their incomes shouldn’t be affected. It can cover that shortfall.”

If the shoe fits

It’s a well touted fact that Australians are underinsured.

According to ASIC, recent surveys in Australia have revealed that between 27 per cent and 81 per cent of home owners were underinsured. While the ASIC reference is to home and contents and building insurance it highlights the general lack of understanding most Australian have when it comes to protecting their assets or their income.

Brokers can now access a range of insurance based products – from obvious choices such as landlords insurance and income protection to term life insurance or total and permanent disability.

Despite the very real need for insurance, it is protection that few proactively seek. Brokers are therefore ideally positioned to prompt their clients to consider their cover requirements at the point that they assess their mortgage needs.

“As mortgage brokers, we are changing people’s circumstances by increasing their wealth – but we’re not protecting them,” Mr Burns says. “Insurance should be part of that service.”

Christine Attridge of ACE-IRM agrees. She says insurance should go hand-in-hand with other services brokers provide, using involuntary unemployment insurance as an example.

Such insurance will ensure the client has an income source to meet their financial commitments if they lose their job unexpectedly.

But while the concept makes good sense, the practicality of tying in insurance as part of the client presentation can be tricky.

“The greatest challenge is how to introduce it to the client,” Smartline’s Chris Acret says.

“Many brokers are hesitant of initiating the conversation or really struggle with how to approach it.”

Darren Joseph, founder and director of Insureyou.com.au, says the main challenge for brokers is to change their mindset when it comes to selling insurance compared to home loans.

“The difficulty for brokers is that they don’t really need to sell a mortgage, they assist and help their client to find the right one. Insurance is different,” he says.

The prospect of introducing insurance to a client that has not requested it can be daunting. It is generally the case that few people have thought carefully about their insurance requirements and it is rarely top of mind.

Phil Quin-Conroy, NAB Broker’s head of insurance and licensee solutions, says that incorporating insurance into a presentation requires the broker to step out of their comfort zone.

“We think it’s essential to integrate insurance into the whole home loan service, not just as an afterthought. It’s not a ‘do you want fries with that’ approach.”

“You actually have to disturb the client to get them to think about insurance,” he says.

He suggests that brokers approach insurance as part and parcel of the mortgage process, introducing the idea early on during the fact find.

“We offer insurance as a value-add to our clients – as something that gives them protection and saves them time and money. In that context it is an easy conversation to have.”

The options

Brokers generally have three options open to them when it comes to adding insurance to their product suite.

The first is a simple, no-advice referral arrangement where the broker receives a commission for referring their client to an insurance provider.  This is often a good entry level for brokers to test the water while they find their feet in insurance.

The next is to work with the support of a qualified and trained insurance broker. For brokers who are gearing up to move into offering their own advice this approach can help them learn the ropes while achieve the training and qualifications required to offer limited advice.

In as little as a few days brokers can be ready to offer limited advice and have more control over the client relationship as well as the sales process. From there the broker can up-skill to offering full advice.

The rule of thumb is the greater level of service provided by the broker, the greater the remuneration. Of course, a broker that wants to provide insurance advice will need to channel time and money into training and accreditation. To become fully qualified requires a diploma of financial services, while limited advice models can require a day or two of training.

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A CASE IN POINT

 
Jaison Singh, director of Financial Elements, explains his experience diversifying into insurance.

How long have you been offering insurance?

Nine months.

How has insurance impacted your bottom line?

Adding insurance to my business was more about relationship-building and client retention than remuneration. But the end result has actually been an improvement in my overall commissions by 30 per cent.

How does offering insurance products strengthen your client relationship?

Clients are very receptive to it. They see us as a broader service provider now, rather than just a mortgage provider. As insurance is renewed frequently, it also provides another excuse to get in touch with clients.

How easy/difficult is insurance to incorporate into a presentation and sell?

You need to introduce the concept in your initial presentation and demonstrate to the client the need for insurance so they can recognise it themselves, rather than you having to sell it to them. It was a new challenge but I enjoyed it.

Advice to other brokers

Don’t look at it as an add-on product, but as part of your business.

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CHOOSING TO REFER

For the newly merged Tiffen and Co. and The Mortgage Detective, local referral relationships are their weapon of choice with insurance.

While their loan writers have access to insurance through their aggregator, they also have long-term local referral relationships.

Alison Whittle, director of operations, says whether adding insurance will work for a broker/brokerage depends on every individual business and their business structure.

“Adopting a full model may be a good idea for sole operators but we prefer referral partnerships,” she says. “For us this seems to work better.”

She believes the idea that multi-product offerings create stickier clients isn’t all true.

“Consumers are very aware these days and they’re educated. I think they’re able and happy to source specialised service providers themselves.

“If you look after them and provide them with a good home loan service and refer them to a good specialist that can equally strengthen your relationships.”

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