In today’s shady economy, the financial wolves have turned to life insurance as a main hard sell. Lending is right down, house prices are dropping, first time buyers cannot get on the property ladder and people find it hard to get credit cards. Mortgage brokers are going to the wall daily, mostly due to the over lending of the early 2000’s coming back to haunt the economy. Belts are tightening all around and so could the saviour be life insurance? It seems that many brokers think so, and how wrong they are.
As i write this, i have had an email asking me to change my life insurance and i could get it for under £5 per month….hmmmmm if only. We get sold life insurance off the back of email, newspaper campaigns, phone calls and with almost every conceivable financial product. Your bank will want you to use their preferred life insurer, as will your mortgage adviser as will your friendly Indian cold caller. The truth is that life insurance is the last thing that many people will cancel, even in a recession, and as such commissions for it have not dropped.
Average commissions online to a broker for a life insurance policy are £450-£500 for doing very little work. This has enticed many mortgage companies to switch to life insurance and critical illness cover. What many of them have not accounted for is CLAWBACK. Clawback is where the customer takes out a policy and subsequently cancels it; the insurance broker then has to pay back the commission he received. Clawback is putting many brokerages who thought that life insurance was easy picking, out of business.
In this economy, life insurance has become a product that is so over sold, and incorrectly sold, that companies are facing cancellations of up to 50%. Not accounting for this sinks many fledgling businesses.
Yes you can get life insurance (maybe)from £5 a month, just make sure you know what it covers and what it does not cover. The companies that do well in life insurance are the ones that sell it once but sell it right, that means the correct cover at the correct price for the correct amount of time.
Scott Stout of lifeinsurancequotes.co.uk said “we find that our clawback is lower because we tend to sell the product less aggressively and more thoroughly. If we got 40% clawback, we would be out of business very fast.”
Next time you get asked to review your life insurance as they want to “save you money,” make sure you do it once, and do it right. Know what you are covered for and what you are not. Prudential recently launched a new product called Pruprotect which plays on the fact that most other insurers will not cover women against certain types of breast cancer. It also covers 128 serious illnesses where others tend to cover many less, sometimes under 30.There would be no way of knowing this for the average person without asking.
Ask for a discount too, brokers can discount your policies up to 20% in a lot of cases but people rarely ask. Also know that there is a fair chance that the broker who sold you the policy may be going under any time soon if he or she has not been prudent.