Lenders could cut distribution, warns Swiss Re
Share
Swiss Re has warned that additional responsibilities placed on lenders as a result of the Mortgage Market Review could result in lenders cutting down their distribution and lead to even more competition among insurance providers as they look to secure deals with large mortgage suppliers.
In its 2009 Insurance Report it says that with lenders taking on more responsibility for things such as affordability it could result in lenders becoming more selective in choosing which intermediaries they will do business with.
Swiss Re says if the mortgage broker market continues to contract, there will be even more competition among insurance providers to secure deals with large mortgage suppliers.
The report says: “As providers become more selective in the products they offer, they will equally be selective in the advisers they choose to do business with. We expect product providers to reassess their adviser relationships, choosing not to deal with those firms where there is a lack of alignment or where the volume of business is not likely to justify a relationship.”
But it says there is no reason why successful intermediary firms need to be large, the biggest threat being to so-called “stuck-in-the-middle” firms, having neither the scale to move up market or the competence to specialise.
It says: “The intermediaries that emerge out of this will be stronger, more competitive and more efficient.”
Its report also reports that the increasing trend of young adults entering into shared ownership with their parents, in order to get onto the housing ladder, could lead to an increase in demand for protection benefits as parents and offspring each seek to protect against the other party being unable to meet the future mortgage costs.
But warns: “Many firms operating in the long-term insurance sector have, for many years, been dependent on the mortgage market for their business, with the arrangement and conclusion of mortgage finance providing a key trigger point for long-term cover sales.”
Swiss Re’s research suggests that people are unable to distinguish between independent financial advisers and those advising on a limited range of products.
The majority of people who thought they could name at least one IFA mostly cited the high street banks. Other names believed by people to be IFAs include Allied Dunbar, AXA, Lloyds CIS (sic), Royal Life, Scottish Equity (sic), Baines & Ernst, the Post Office, and the websites of Richard Branson and Martin Lewis.
