Aviva has called for the discussion of protection to be made a compulsory part of the mortgage sale process as part of a series of recommendations it has made to bridge the protection gap.
It says only four out of 10 families have life insurance in place and the number of families with critical illness cover or income protection is even lower, at around 12 per cent and 8 per cent respectively.
As a result it has published a report called Rethinking Protection, in which it presents six proposals ranging from giving information on protection to first-time parents and divorcing couples to making income protection available through workplace schemes and making protection a compulsory module in financial education classes.
But it also wants the discussion of protection to be made compulsory as part of the mortgage sale process, with advisers required to discuss a client’s protection needs when carrying out a mortgage sale, as part of a duty of care to new homeowners.
Aviva protection director Louise Colley says that by working together, the government and the industry can make sure that families have the stability they need. She says: ”We believe every family deserves to understand the financial risks they face and the importance of protection.”
Pink Network managing director Mark Graves welcomes the push by Aviva to engage with the Government and FCA to voice industry concerns.
And he goes as far to question whether a broker should proceed with a mortgage if the client says they can’t afford protection.
He says: ”Protection advice should form part of every adviser’s sales process. The question regarding stress testing is this: if a client states they cannot afford protection, then should the broker proceed with the mortgage?
”We recommend that every Pink adviser completes a protection advice form where the client confirms/signs to the effect they have received and then rejected the adviser’s advice.”
Graves says the consequences of not getting this type of disclaimer could be major and he argues that if a client is in danger of losing their home due to illness or loss of employment, the first place they will go to complain is the intermediary.
He adds: ”The disclaimer may well be the only difference between a client accepting responsibility or the adviser ending up in court.”