Intermediaries not well versed in insurance should refer the case to a specialist and avoid the risk of misselling claims
Imagine you visit your doctor for a medical procedure. You’re naturally nervous but you put your faith in the expertise of your physician, only for him to turn around and tell you he’s not really an expert at this but he “gives it a go every now and again”.
It’s hardly going to fill you with confidence is it? Yet this is the approach many advisers in financial services could be taking.
Over the years I have often heard mortgage intermediaries say they don’t really ‘do’ general insurance but they’ll arrange the odd policy. Now, the fact that brokers are really not engaging with GI is a matter of concern in itself as it is a policy that must be in place as part of a lender’s mortgage conditions.
However, taking an ad hoc approach to insurance products could mean the broker is leaving himself wide open to possible future mis-selling claims. Even if the broker has done everything right, the fact they’re not very experienced in the sector makes them a target when consumers need someone to blame.
Recently a network and intermediary were forced to pay massive compensation to a customer whose fire damage claim had been rejected by their insurer. The customer alleged that the intermediary had apparently not disclosed their previous claims history to the new insurer.
When you look at it this way it’s an awful lot of risk to take for the sake of a commission of, say, £75. But there is another option. Referring your GI cases to a specialist firm allows you to retain the client’s business and earn a commission without putting your neck on the line in a field in which you’re not an expert. Indeed, commissions for referrals are not that different to direct sales, often around the £50 mark.
Expert GI specialist companies will take away from the intermediary any risk of non-disclosure and the intermediary is then free to concentrate their efforts on higher value products in which they are an expert. Providing they have done due diligence on their chosen partner they can have complete peace of mind that the case is being handled correctly.
In order to be the best and stay ahead of your competitors you need to be offering a holistic service to your clients. However, that doesn’t mean taking unnecessary risks. There are enough changes taking place in the mortgage market at present that brokers need to get their heads around without adding another into the mix.
Phil Whitehouse is managing director of MCI Mortgage Club