WHY MORTGAGE CLIENTS NEED INCOME …...an Income Protection solution •Be able to compile a multi benefit protection recommendation to your mortgage clients, focusing on different

INCOME PROTECTIONWHY MORTGAGE CLIENTS NEED

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WHY MORTGAGE CLIENTS NEED IPHOUSEKEEPING

• Questions can be submitted in the ‘Ask a question’ box below the main webinar feed

• If you encounter any technical issues use the support option and then select ‘viewers’ and someone from BrightTALK will help you out

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• State of the income protection nation

• Positioning the protection need to mortgage clients

• Pre sales underwriting

• How much cover can my clients have?

• Illustrating the income shortfall

• Designing a protection solution for mortgage clients

• Finding the budget for self employed clients

WHY MORTGAGE CLIENTS NEED IPAGENDA

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At the end of this webinar you should…

• Understand the continuing need to mitigate the problems caused by loss of income through sickness and incapacity

• Be able to position talking points to highlight protection risks to your mortgage clients

• Describe the features and benefits contained within an Income Protection solution

• Be able to compile a multi benefit protection recommendation to your mortgage clients, focusing on different areas of protection risk

WHY MORTGAGE CLIENTS NEED IPLEARNING OBJECTIVES

STATE OF THE INCOME PROTECTION NATION

STATE OF THE NATIONBEING OFF WORK SICK

• Its estimated that people in the UK take 137.3 million days off work sick each year *

• Often, this is for minor issues

• Sometimes the sickness is more serious

• Some people stay off work for long periods of time

• Some people never return to work again

Source -https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2016

Minor Serious

off work sick

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2016

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STATE OF THE NATIONCLAIMANTS OF STATE BENEFITS

Data from the Department of Work and Pensions shows that between October 2013 and September 2018…

• 4.3 million people started an Employment & Support Allowance Work Capability Assessment

• ESA is a state benefit which can be claimed if the claimant is unable to work

• Employed claimants cannot begin their claim for ESA until their 28 weeks of statutory sick pay has ended

• The claim form is 64 pages long

Source: Department of Work and Pensions - Work Capability Assessments, Mandatory Reconsiderations and Appeals - June 2019 https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2016

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/articles/sicknessabsenceinthelabourmarket/2016

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STATE OF THE NATIONSTATE BENEFITS

• Another state benefit which could be claimed by people with a mortgage is SMI –Support for Mortgage Interest

• (SMI) is designed to help people pay their mortgage payments should they lose their income

Source - Gov.uk/support-for-mortgage-interest/what-youll-get - Rates as at June 2019

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CLAIMING STATE BENEFITSSUPPORT FOR MORTGAGE INTEREST (SMI)

• SMI provides benefit based on a current interest rate of 2.61%

• The maximum limit is for loans of up to £200,000

• The normal waiting period is 39 weeks

• SMI benefit is paid as a loanwhich means it needs to be repaid

• Repayment of SMI also includes interest when you sell or transfer ownership of your home

• The current interest rate is 1.3%and is subject to changes

• SMI cannot help pay anything towards insurance policies or missed mortgage payments (arrears)

• To qualify for a Support for Mortgage Interest (SMI) loan you usually need to be getting one of the following:

• Income Support

• Income-based Jobseeker’s Allowance (JSA)

• Income-related Employment and Support Allowance (ESA)

• Universal Credit

• Pension Credit

Source - Gov.uk/support-for-mortgage-interest/what-youll-get - Rates as at June 2019

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STATE OF THE PROTECTION NATIONSAVING FOR A RAINY DAY…

• Having sufficient savings can be used to replace lost income

• However, according to a Money Advice Service 10.7 million adults in the UK have NO savings

• This is 21% of the population

• People who do save have an average savings balance of £4,212.40

Source: Building the Financial Capability of UK Adults – 2018 – Money Advice Servicehttps://masassets.blob.core.windows.net/cms/files/000/001/147/original/Adult_Financial_Capability_-_Survey.pdfSource - https://www.independent.co.uk/news/uk/home-news/british-adults-savings-none-quarter-debt-cost-living-emergencies-survey-results-a8265111.html -March 2018

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2018

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/2018

https://masassets.blob.core.windows.net/cms/files/000/001/147/original/Adult_Financial_Capability_-_Survey.pdf

https://www.independent.co.uk/news/uk/home-news/british-adults-savings-none-quarter-debt-cost-living-emergencies-survey-results-a8265111.html

STATE OF THE PROTECTION NATIONBEING OFF WORK SICK

• The average full time income in the UK in 2018 was £29,588 *

• Rounded up to an annual income of £30,000 this equates to net take home pay of £1,995 per month

Source -https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours

https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours

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STATE OF THE PROTECTION NATIONAVERAGE INCOMES AND OUTGOINGS

• Lets say someone earning the UK’s average annual income (£30,000 p.a.) with the average level of savings lost their income through sickness…

• Let’s say their average monthly outgoings were £1,500 each month

Is income replacement through savings

a viable solution?

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1500 1500 1212

-288

-1788

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

Month 1 Month 2 Month 3 Month 4

STATE OF THE PROTECTION NATIONREPLACING INCOME WITH SAVINGS

Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £4214. Monthly outgoings of £1,500

Savings

Savings

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1500 1500 1212

-288

-1788

-3000

-2000

-1000

0

1000

2000

3000

4000

5000

Month 1 Month 2 Month 3 Month 4

STATE OF THE PROTECTION NATIONREPLACING INCOME WITH SAVINGS

All savings are depleted in the 3rd month

of sickness

Savings

Savings

Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £4214. Monthly outgoings of £1,500

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STATE OF THE PROTECTION NATIONHOW LONG DO IP CLAIMANTS CLAIM?

• Royal London’s claims statistics 2019 reports that the average length of time for Income Protection claims is 9 years and 11 months

• That’s the loss of 119 paydays

Source: Royal London Claims Statistics 2019https://adviser.royallondon.com/globalassets/docs/protection/brp8p10004-our-claims-statistics.pdf

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Royal London’s State of the Protection

Nation 2019 surveyed over 2000 people

ROYAL LONDONSTATE OF THE PROTECTION NATION 2019

Source: Royal London State of the Protection Nation 2019https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

https://adviser.royallondon.com/globalassets/docs/protection/state-of-protection-nation.pdf

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…said they would last less than 3 months on their savings and investments if they couldn’t work due to illness or injury.

18 – 35 years oldYoung singles / home sharers

Private renters

56%




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…said they wouldn't last three months financially if they couldn’t work due to illness or injury.

Working Renters(with Private Landlords)

62%




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• Consumers believe they're almost twice as likely to die during their working life than to have an accident that prevents them from working.

• They also think that they are more likely to die than to suffer a critical illness during their working lifetime




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• Almost a quarter of workers (22%) feel they could only survive financially for a month or less if their income stopped.




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INCOME PROTECTIONTOTAL SALES BY VOLUME 2014 TO 2018

96,889

107,302

117,814 121,084

148,498

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2014 2015 2016 2017 2018

Source: Swiss Re Term & Health Watch 2019

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INCOME PROTECTIONTOTAL SALES BY TYPE - 2018


58%

10%

30%

2%

Full benefit

One year

Two year

Five year

Other

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122,471

23,755

76 2,196 -

20,000

40,000

60,000

80,000

100,000

120,000

140,000

DirectlyAuthorised

Tied Direct Bancassurance


INCOME PROTECTIONSALES BY DISTRIBUTION CHANNEL 2018

POSITIONING THE PROTECTION NEED

TO MORTGAGE CLIENTS

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SETTING OUT YOUR STALLCLIENT EXPECTATIONS?

• Business Card – 2 objectives?

• Mortgage AND Protection Adviser

• Same level of importance?

• Duty of Care

• Normal Business Practice

PUTTING PROTECTION ON THE AGENDANORMAL BUSINESS PRACTICE

• Let me explain my ‘Normal Business Practice’

• This is how I work with my clients and this is what my service looks like…

I’ll source and recommend the most suitable and affordable mortgage for you

and

‘My job is to make sure that should the worst happen, you and your family are able to keep your

home and maintain your lifestyle…’

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REGULATORY RISK WARNING

Your home is at risk if you

do not keep up repayments

on your mortgage…

What are the risks that could potentially

stop you from keeping up your mortgage

repayments?

ILLUSTRATING PROTECTIONRISKS & SHORTFALLS

Consumer perceptions are out of sync with reality?

• Based on findings from Royal London’s State of the Nation 2019; consumers think there they are more likely to die during their working lifetime than to go on sick leave for 3 months or more, or suffer a critical illness.

• 22% of workers surveyed said they could only last financially for a month or less if their income stopped



What are the risks faced by a typical mortgage client?

• John• aged 30• Smoker• 30 year Mortgage

The chance that anyof these things could

happen?

ILLUSTRATING PROTECTIONRISKS & SHORTFALLS

Source: studio.royallondon.com

ROYAL LONDON MARKETING STUDIORISK REPORTS – I DON’T THINK I NEED IT?

What are the risks faced by a typical mortgage client?

• John• aged 30• Smoker• 30 year Mortgage


ROYAL LONDON MARKETING STUDIORISK REPORTS – I DON’T THINK I NEED IT?

Risk Report CI Report


IP Report

PRE SALESUNDERWRITING

adviser.royallondon.com

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25/07/2019

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30

42

43

46

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48

50

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HOW MUCH INCOME PROTECTION COVERCAN MY CLIENT HAVE?

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25/07/2019

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25/07/201957

59

60

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ILLUSTRATING THE INCOME SHORTFALL

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DESIGNING AN INCOME PROTECTION SOLUTION

MORTGAGE CLIENTS

DESIGNING AN INCOME PROTECTION SOLUTIONHOW MUCH IS JUST ENOUGH?

How much will Income

Protection cost me?

DESIGNING AN INCOME PROTECTION SOLUTIONFACTORS TO INFLUENCE THE COST

• Can the client get Income Protection?

• How much can the client afford to pay?

• What waiting period is needed?

• How much income is needed? What’s the maximum? How much would be enough?

• How long should the plan run for?

• How long should a claim be paid for?

• Should the benefit increase over the term?

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DESIGNING A MORTGAGE PROTECTION SOLUTIONON A BUDGET

• Bob 28 nb, Sue 30 nb

• Both non smokers

• Bob is the main income earner on £30,000 and employed full time

• Sue works part time and earns £10,000 per annum

• They have £10,000 in savings - but nothing else they could use to replace their income in the event of sickness or incapacity during their working lifetime, other than state benefits.

• They have a repayment mortgage which is £150,000 over 25 years

Case Study parameters – both clients class 1 occupations –Bob’s occupation Office Manager, Sue’s occupation Secretary

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• Bob 28 nb, Sue 30 nb

• Both non smokers

• Bob is the main income earner on £30,000 and employed full time

• Having seen the likelihood of claim, they want to include some Income Protection, but are worried they won’t be able to afford the cover they need

• Their budget is £30 per month

Case Study parameters – both clients class 1 occupations –Bob’s occupation Accountant, Sue’s occupation Secretary


Joint Life Cover(Mort Rep Guarantee)decreasing 25 years£150,000

Total Cost: £8.03

£8.03

Source: Royal London Personal Protection Menu, June 2019 . Couple aged 28 male and 30 female next birthday, both non-smokers. Costs shown includes £2.60 plan charge for each cover.

Income Protection for Bob?

Income Protection for Sue?


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INCOME PROTECTIONHOW MUCH COULD THEY HAVE?

Bob Sue

Term

Amount

Level / Increasing

Deferred Period

Payment Period

Monthly Premium

42 years (to age 70)

£18,000 (max allowable)

Indexed RPI

4 weeks

Full Term



Indexed RPI

4 weeks

Full Term

£54.75 £23.52

Source: Royal London Personal Protection Menu, Quotes produced June 2019 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge

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INCOME PROTECTIONIF YOU CAN’T DO ROLLS ROYCE…

Bob Sue

Term

Amount

Level / Increasing

Deferred Period

Payment Period

Monthly Premium



Indexed RPI

4 weeks

Full Term



Indexed RPI

4 weeks

Full Term

£54.75 £23.52


£15,000 (£1,250 pm)

5 years



5 years

£16.14 £9.96

4 weeks 4 weeks13 weeks 13 weeks

Source: Royal London Personal Protection Menu, Quotes produced June 2019 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge and waiver of premium


Total Cost: £8.03

£8.03

Source: Royal London Personal Protection Menu, June 2019 Couple aged 34 and 30 next birthday, both non-smokers. Costs shown includes £2.60 plan charge for each cover. Income Protection plans include waiver of premium

Income Protection for Bob?

Income Protection for Sue?

Bob Income ProtectionD13, £15,000 per annum37 year term (to age 65)Indexed RPI

Bob Income ProtectionD13, £6,500 per annum37 year term (to age 65)Indexed RPI

£16.14

£9.96

Plan fee

Plan fee

Plan fee

Total Cost: £24.17Total Cost: £34.13


Total Cost: £29.56

Sue - Income ProtectionD13, £6,500 per annum35 year term (to age 65)Indexed RPI – 5 year benefit

Bob - Income ProtectionD13, £15,000 per annum37 year term (to age 65)Indexed RPI – 5 year benefit

DESIGNING A MORTGAGE PROTECTION SOLUTIONON A BUDGET - IN A MENU


Source: Royal London Personal Protection Menu, June 2019 Couple aged 28 and 30 next birthday, both non-smokers. Both class 1 occupations.

Plan fee

BobWaiver of Premium D13

SueWaiver of Premium D13

Royal London Protection Menu

FINDING THE BUDGETFOR SELF EMPLOYED CLIENTS

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25/07/2019

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Bob

45,000

Bob

45,000

Bob

45,000

HOW ROYAL LONDON CAN HELP?INCOME PROTECTION

• Own occupation on all cover

• Fracture cover built into every plan at no extra cost

• Choice of 1 year, 2 year, 5 year or full payment benefit terms

• Indexed linked claims

• Minimum Income Guarantee

• Max cover £250,000

• Helping Hand

• Cover increase options (GIO’s)

• and lots more…

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• Understand the continuing need to mitigate the problems caused by loss of income through sickness and incapacity

• How to position talking points to highlight protection risks to your mortgage clients

• Describe the features and benefits contained within an Income Protection solution

• Be able to compile a multi benefit protection recommendation to your mortgage clients, focusing on different areas of protection risk

WHY MORTGAGE CLIENTS NEED IPLEARNING OUTCOMES

Questions

INCOME PROTECTION WEBINAR SERIESOUR NEXT WEBINAR?

• The final part of our income protection webinar series

• “Discovering the technical features and benefits of an income protection plan”

• 28 August at 10am

THANKYOU

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration number 302391. Registered in England and Wales number 4414137. Registered office: 55 Gracechurch Street, London EC3V 0RL. June 2019 PRP8PN0159

Documents

WHY MORTGAGE CLIENTS NEED INCOME …...an Income Protection solution •Be able to compile a multi benefit protection recommendation to your mortgage clients, focusing on different