Hundreds of mortgages but hardly any protection: what will it take to change?

The publication of the latest AMI Protection Viewpoint report is always an important moment for our industry, providing an opportunity to assess how consumers view protection, how advisers approach it and, perhaps most importantly, whether we are making meaningful progress in closing the much-talked-about protection gap.

This year's report, 'Protection Reimagined', contains some particularly challenging findings, and while there are positives to take from the research, I think it also raises some uncomfortable questions about whether our industry is doing everything it could, and should, to ensure customers properly consider their protection needs.

Perhaps the most striking finding is that 43% of consumers who have received financial advice have never received a protection quote, a figure which I was asked to comment on within the report itself and which I believe falls well short of where our industry needs to be.
 

Are we having the right conversations?

Of course, receiving financial advice does not necessarily mean receiving mortgage advice, and not every client will require a protection recommendation, but surely, we should be questioning why so many advised consumers have never reached the stage of obtaining a quote?

I have spoken previously about mortgage firms completing hundreds of mortgage cases each month while arranging comparatively little protection business, and I think the latest research should encourage those businesses to examine what is happening within their own client relationships.

If a firm is completing 200 mortgages a month but only arranging a handful of protection policies, is that because the vast majority of customers already have suitable arrangements, have made informed decisions not to proceed, or because the conversations are simply not taking place effectively?

Those are very different situations, and firms should, to maintain full compliance, be able to demonstrate which applies rather than simply assuming their existing approach is delivering the right outcomes. Getting disclaimer forms signed to say the client didn’t want to discuss it is no longer a compliant option.
 

Is affordability becoming an assumption?

Another finding which caught my attention was that 82% of consumers who say they cannot afford protection have never received a quote, which raises questions about how affordability is being discussed and understood.

Clearly, some customers will genuinely struggle to accommodate another monthly commitment, particularly in the current economic environment, but how can somebody make a properly informed decision about affordability without understanding what suitable cover might actually cost?

Advisers have an important role in explaining the options available, prioritising different protection needs and considering whether some appropriate cover might be achievable within a customer's budget.

The research also found that, depending on why consumers abandoned the protection purchasing process, between 79% and 95% identified something which might have changed their decision.

That does not mean advisers should challenge every refusal or attempt to persuade customers into buying something they do not want, but it does suggest a decision not to proceed today should not automatically close the conversation forever.
 

Protection cannot be a one-off discussion

This brings me to another concerning statistic, with only 30% of advisers saying they proactively review protection at regular intervals, despite the fact that customers' financial circumstances, employment, families and responsibilities can change considerably over time.

We also learn that only 25% of consumers expect to return to their existing adviser for their next mortgage review, which should make firms question whether waiting until the next remortgage is a sufficiently reliable approach to maintaining contact.

At Paradigm, we have been hugely active in a campaign to make advice mandatory for first-time buyers. Part of the supporting rationale for this, and the concern of the removal of the advice trigger last year, is that consumers may not be getting proper ongoing protection advice alongside the mortgage.

If we as an adviser community do not offer that on a regular basis, or when the client needs it most, then we are in danger of exhibiting double standards.

A customer who declined protection two years ago might now have children, a larger mortgage, different employment circumstances or greater financial responsibilities, and what was unsuitable or unaffordable previously might warrant reconsideration.

There is a clear commercial opportunity here, but more importantly, there is an opportunity to provide better ongoing advice and help customers understand how their financial resilience might have changed.
 

What are firms actually measuring?

For me, this is where the research should prompt some serious reflection, particularly given the FCA's recent Pure Protection Market Study and its expectations around improving consumer engagement.

Rather than simply counting mortgage completions and protection sales, firms should be looking at how many customers have meaningful protection discussions, how many receive quotes, why some decide against proceeding and whether appropriate follow-up arrangements exist.

Consumer Duty should already be encouraging this approach, because delivering good outcomes is not simply about having a process which says protection was mentioned, but understanding whether customers received the information and support necessary to make informed decisions.

The AMI research gives us valuable evidence of where the problems remain, but it is what firms do with those findings that will ultimately matter. We have spent years discussing the protection gap, and while there has undoubtedly been some progress, I would suggest the latest Viewpoint findings show there is still considerable work ahead.

If firms are arranging hundreds of mortgages but very little protection, now seems an appropriate time to ask whether the existing approach is genuinely working, because the answer matters far more to their customers than any protection sales target ever could.