In this column Cura MD Alan Knowles walks through an example of protection signposting in action involving a real-life client, outlining the benefits and dealing with commission arrangements
At Cura, a significant portion of our business comes from referrals from other brokers. These are primarily made up of wealth advisers, mortgage brokers and other protection specialists. This is signposting in practice.
In this context there are two ways to ‘signpost' or ‘introduce' protection insurance:
- The first and most common is to refer out all of your protection needs, perhaps because you don't do protection or because you don't have time. This is a perfect way to do right by your client, who might be buying a mortgage or receiving financial planning services.
- The second is to just ‘signpost' the customer when you simply cannot place it yourself. This could be due to something like a complicated medical condition, extensive foreign travel or a high-risk job.
When Cura work with introducers, we are clear from the start, we sit in the second camp. Through everything that we do, we remain focused upon what we have excelled at over the years: helping customers who have been declined cover. Our message is simple:
‘If you can write the cover yourself then do, but if you are out of options, come to us.'
As you'd expect, most of the referrals we receive are due to medical conditions, but we are also seeing an increase in the number of introductions for client's travelling to high risk locations and with hazardous jobs (well, we were before Covid-19!). When you think about difficult to underwrite medical conditions, we're currently helping a customer with a condition with less than 200 confirmed cases worldwide, to say this is a rare condition would be an understatement.
We knew early on that if we wanted to encourage other advisers to refer and want to come back to us again and again, we would have to have robust processes in place and a service they could trust.
Robustness and Trust
I still remember an old boss I had (for anyone at the Customer Care awards last year, you might remember The Penguin!), he told me never to introduce business as other advisers just wanted to steal your business. Okay, the Penguin was a dinosaur, and I hope most people don't think this way now, but we still had to make sure that this wasn't what people thought.
So, we made a fundamental part of our referral process to be complete transparency with no crossovers. We would not recommend other products without speaking to the introducing IFA first, so if they wanted to, they could arrange the additional cover. This has been warmly welcomed as it gives peace of mind to the introducer, that we won't rebroke or mess around with cover they've already done. Any signposting/referral arrangement should be built on trust. Without trust the relationship will not last long.
One of the questions we are usually asked early on is: ‘What about commission?' And rightly so!
We believe that it is important to pay some of the commission to the introducing firm. It builds the business relationship on good terms and shows a respect to the introducer that you are thankful for their business. We decided to place no time limit on this and honour any plans written for an introduced client now and in the future.
One challenge we sometimes face is, ‘why would I give away most of my commission'? If we are talking commission, then the answer is simple: 100% of nothing is nothing. By using the services of a specialist protection firm, you get commission where otherwise there would be none.
But what is the benefit, other than a bit of commission?
Let me answer with an example.
Signposting in Action
We were recently contacted by an adviser who had a married couple that he had arranged a mortgage for. He had done a great job in recommending that they protect their new mortgage with life insurance. The adviser had been successful in finding cover for one of the clients, but for the other client he was seriously struggling due to a pre-existing health condition.
The client, now in his late 30s, had a form of kidney disease called IgA Nephropathy, a condition which causes damage to the small filters inside the kidneys. Sadly, his kidneys failed some years ago and he needed a transplant. He had a transplant from a direct family member who lovingly donated it to him. Except for some renal hypertension, the client was then fit and well for many years. However, 12 months ago he got what is known as a CMV infection, which transplant patients are at a higher risk of contracting. I am pleased to say that now, he is fit and well again.
It was obvious why the mortgage broker had struggled; this was quite complicated and not the type of case you see every day. The adviser confirmed he was able to place cover for one of the lives, but really needed help with this one as it would be very hard to explain that only one of the couple could be covered. Our suggestion therefore was that he place the cover for the wife and refer the husband to us. I may have cringingly said ‘Teamwork makes the dream work...'
Prior to referral we had already done our research and were pretty confident that we could offer at least life insurance. We gave the broker an idea of the likely cost first (no point referring if it was going to be £500pm!). The broker placed his confidence in us and introduced the client to us.
Once the client was referred, we did our own due diligence and fact find. Due to the client's medical condition we understood there would be a cap on the policy term, something which is unusual for life cover but does happen with certain risks, especially major organ transplants. Due to the term being capped at 11 years we could not offer a decreasing policy, as the mortgage was 25 years, it would have simply reduced too fast and therefore we offered £220,000 level term cover over 11 years.
Whilst the term was not perfect, this was 11 years more cover than the mortgage broker had been able to find and both the adviser and the customer were delighted.
We have also scheduled annual reviews so we can try to get a longer term as soon as we are able.
The Real Benefits of Signposting
So, what's the point?
- Commission was earned where otherwise there would have been none.
- The broker saved a lot of time and was able to focus on what he was good at.
- The broker retained the client he could place.
- His regulatory risk was lower for the broker, as he's tried everything possible to help his clients.
- The client didn't resort to shopping around online, which could have resulted in some poor outcomes for the broker and client.
- Most importantly, the client got cover for their mortgage and family, and now has peace of mind.
Signposting has the potential to change our industry for the better. It means protecting more families and businesses, better customer outcomes and a better industry reputation.
Alan Knowles is managing director of Cura Financial Services