Brokers should champion self-insurance, writes Neil Galjaard, insurance director, Paymentshield
It is undeniable that the outlook for the UK housing market continues to be bleak with the FSA recently announcing a 17% increase in repossessions for the first quarter of the year.
Unfortunately with first time buyers struggling to get on to the property ladder due to tighter lending criteria an unstable job market stemming the flow of homeowners selling, and proposed EU regulation that could restrict the market even further coming into affect later this year, these turbulent times look set to continue.
In addition, key government initiatives such as the Mortgage Rescue Scheme, have failed to provide effective support for UK homeowners. A report from the National Audit Office highlighted that the Mortgage Rescue Scheme has failed to meet its target to help 6,000 people struggling to pay their mortgage, so there is clearly a call for an alternative solution.
The scheme has only helped 2,600 households since its launch in 2008, whereas products such as mortgage payment protection insurance (MPPI) are providing a real lifeline for UK households.
As an example, in the last two years Paymentshield has helped more than 22,000 families to stay in their own homes, assisting them through their MPPI claim. This dramatic difference in numbers highlights a real need for UK homeowners to protect their own financial future, rather than relying on government initiatives.
The National Audit Office also accused the government of misunderstanding the needs of homeowners, under budgeting and not responding quickly enough when the scheme was failing to deliver an effective solution.
This presents a real opportunity for intermediaries, as the uncertain backdrop and failing Mortgage Rescue Scheme highlights the need for quality advice. Providing the right insurance product and cover that complements any changes to individual circumstances is what’s needed to provide reassurance to consumers.
The failed Mortgage Rescue Scheme aimed to help people struggling to pay their mortgage repayments, and was set to offer a lifeline to homeowners. The lack of uptake and over budgeting highlights that the government scheme ‘of last resort’ is not a feasible solution to supporting homeowners.
What’s more, the scheme was supposed to help ease the stress for homeowners and yet it only offers support once the family is already struggling. However, with protection products such as mortgage payment protection and income insurance, if the customer’s monthly income suddenly stops, the policy will start to pay out before the customer falls into any real difficulty.
The Mortgage Rescue Scheme also presents a complex application process, including restrictive criteria and face-to-face financial reviews, which again, escalates an already stressful situation. There is also the chance that the application will be declined, which reinforces the need for homeowners to provide their own protection.
This presents an opportunity for brokers to champion self-insurance. Customers increasingly require good financial advice and brokers are in the best position to deliver comprehensive recommendations that complement each individual clients’ particular needs.
This process not only increases the possible earning potential for intermediaries, but it builds an ongoing relationship with the client. This is key to retaining them as a loyal customer. Brokers should take this opportunity to turn the negative outlook for the housing market into a real positive for clients and their business.