Andrew Gething is managing director of MorganAsh. MorganAsh has developed the MorganAsh Resilience System (MARS) to help brokers, advisers and financial services firms better manage and evaluate consumer vulnerability and comply with Consumer Duty.
For years the protection market has struggled to engage with mortgage and high-net-worth markets to promote protection. There are exceptions and indeed AMI (Association of Mortgage Intermediaries) and other mortgage leaders have been banging the drum, but this remains an uphill struggle.
Consumer Duty requires all financial firms to mitigate known potential harms. The risk of taking out a loan or mortgage without any sort of protection for ill health or loss of income is a known harm. Protection firms are quite rightly raising this, but will it be enough? A lot of work has gone into promoting signposting but it has not moved the dial as hoped. We suggest that while Duty helps, we still need to do more for mortgage and HNW advisers to make it easier.
The vulnerability assessment gives us a big opportunity. As advisers will have to undertake a vulnerability assessment for mortgages and any other product, they will need to understand the consumer’s health and lifestyle prior to giving any advice. The new crop of vulnerability tools (such as the MorganAsh MARS tool) not only collects this vulnerability data, but also uses this to triage the protection application process. It is like pre-underwriting advice from an underwriter, without the hassle of data collection and phone calls.
Giving the adviser information on the likelihood of cover and how an application is likely to progress enables the adviser to manage expectations with clients. This is all bread and butter to a protection specialist, but for those not used to protection application process, it removes these barriers and eases the application process.
For example, for someone with serious health issues they might be informed that they will qualify for life cover but might struggle to get critical illness or income protection. Hence, they may like to signpost to a protection specialist.
Another challenge and opportunity for protection is the monitoring requirement of the Duty. Those advisers who do little protection may take the view that they don’t want the liability of checking if the protection product is still appropriate. This could cause some to give up or avoid protection entirely. In order to avoid this, we encourage providers to offer to take on the monitoring obligation for their products. They may of course outsource this to advisers.
Of course, the consumer may have other ways to mitigate the risk of ill health and if so then this should be documented. Reporting on potential harms and how they were mitigated should further raise the issue where assets are not being protected and no known protection is in place. Under the monitoring requirements, there is the obligation to continue to try and reduce these harms. Who does this and how often needs to be agreed between provider and adviser.
While most firms are presently looking at vulnerability within their own organisations, the prospect of a consumer having to undertake a vulnerability assessment for each organisation they have a product for is not a great customer journey.
It will be far more customer friendly and efficient to invoke the vulnerability at the time of sale and then share this data with the consumer’s consent with the different providers. This then enables both parties to see any changes in characteristics and lifestyle, enabling better engagement and opportunities to modify products in line with potential harms.
The combination of the carrot of making it easier and the stick of Duty regulation should make a marked difference. It’s therefore in the interest of advisers who received signposted applications and providers who want to grow the market to promote these types of vulnerability tools. Not only does it meet the regulatory requirement on vulnerability, but also assists in the promotion of protection, as well as saving on the cost of staffing pre-underwriting phone lines.