£5 billion there for the taking
PROFESSIONAL ADVISER - 9TH JUNE 2005
Is there an IFA out there who seriously thinks that banks and building societies are motivated by saving them from inconvenience when they try and sell their clients general insurance by bombarding them with a combination of direct mail, phone calls and expensive TV adverts?
For altruism read avarice, and for generosity read greed. Recent research undertaken by my company burgesses Limited has revealed exactly how profitable general insurance is to these lenders.
It is not uncommon for mortgage lenders to take in excess of 80% of a client’s premium in commission and over rider payments, meaning that their cut commonly runs into hundreds, if not thousands, of pounds and contributes massively to shareholder profits. When added together it equates to over £5bn per annum.
For many IFA firms only a small piece of this action could mean the difference between folding and flourishing, and it can be secured simply by utilising the internet based quotation systems that re provided free of charge to authorised firms. Furthermore, with the Financial Services Authority taking an active interest in the sale of protection insurance, the time is now right to put an element of best advice into the sale of general insurance. It is not only the extortionate rip off prices that the High Street lenders are guilty of, but eh quality of the cover they are selling is also often grossly inferior.
For example, lenders’ payment protection insurance tends not to pay out until after a 60 day excess period, whereas independent cover sold through IFA’s usually offer back to day one cover.
Lenders also normally prevent people with pre-existing medical conditions from switching cover without further medical underwriting whereas those who buy from and IFA can avoid this problem with a fully portable policy.
To date many IFAs have simply not bothered with general insurance, and have concentrated instead upon investment orientated areas that are perceived to be more profitable.
It’s not for me to tell anyone how to run their business, but why just lease money on the table?
Isn’t it also a little foolhardy to allow your competitors any opportunity to canvas your clients if you can easily fulfil their needs yourself?
Even if you don’t want to deal in payment protection directly you can out source the entire fulfilment process and regulatory responsibility to an external specialist wholesale and still earn your self useful residual commission.
Whilst such an arrangement will inevitably involve dealing online in order to be cost effective, some of the technology available is use friendly enough to be accessible to even the most ardent Luddite.
Indeed I personally am completely inept on a technical level but with the assistance of my some (aged 13) we build our first website in 1999 and have never looked back.
