Speak now or forever hold your peace

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If most men really are slow to commit, Alberta’s Gord McCallum is the exception to that rule. Almost a year ago, the brokerage owner married his mortgage business to insurance, a case, he says, of the pros outweighing any cons around time, paperwork and hard work.

“We are fighting fire with fire,” the principal broker at First Foundation tells CMP. “We decided that as a revenue centre, it made sense to bring insurance in-house, not only as a way to diversify our revenue stream, but also as a way to grow retention with our clients, to play a bigger role in their lives instead of referring out that business.”

McCallum has now brought car, auto and home offerings under First Foundation’s expanding roof.

The product offering -- additional ammo in the firm’s battle against banks – is only made possible by the employment of a licensed insurance broker to oversee that end of business. It may be more apropos to say “that level of the business” – while his mortgage agents occupy the top floor of the office, insurance is handled at the ground floor, says McCallum.

“So far the system has been good for cross-selling,” he says. “Our brokers are able to generate leads for the auto insurance and the insurance guy is able to refer clients to our brokers.”

It shouldn’t require a whole floor of its own, but McCallum’s possible next step is to incorporate the type of insurance that goes part and parcel with mortgage originations: Life.

A growing number of brokers have beaten McCallum to the punch.

Indeed, CMP’s own informal research points to no fewer than 40 brokerages across Canada now officially “in life.” While models vary, the objectives mirror those of McCallum, who hasn’t yet set a date to bring life coverage under his roof.

Ostensibly the trend spells bad news for creditor insurers in Canada, which have often times struggled to bring mortgage brokers onboard and actively selling the one insurance product they’re already permitted to arrange.

But any sympathy for creditor insurers relying on brokers to sell their wares may be misplaced.

While a growing number of mortgage professionals are, indeed, making the move to incorporate insurance directly into their business plans -- partnering with insurance brokers or themselves getting licensed -- their long-time creditor insurance providers aren’t fearful of the trend. Actually, they’re finding ways to facilitate broker ambitions in that area at the same time meet their sales projections.

“We understand why brokers might want to do it,” says Rich Spence, Sales VP for Benesure Canada, the company behind the Mortgage Protection Plan. “We’re seeing it, but we’re not afraid of it. We’ve developed a new program where we facilitate that move.  

Essentially, what they’re doing is enable MPP to act as the conduit between the mortgage broker and their in-house life agent, and both parties will benefits.  When the broker offers MPP in conjunction with the mortgage, argues Spence, his potential liability has been dealt with; ie, the broker’s client leaves his or her office with protection in place.  Then, the life agent can go over the client’s other insurance choices, and compare those to the MPP coverage already taken out.

“We’re very comfortable with this approach because it provides a great level of personal service for the client and we’re confident that our product stacks up very well against any competitor,” says Spence.

The company is also piloting a term life insurance referral program for brokers. Essentially, the broker arranges MPP protection for a client, but then the client also can choose to be referred to a licensed insurance agent for advice and with an eye to accessing term insurance.

It’s another way of keeping creditor insurance in the loop, even if only as a stop-gap measure.  

“Plus, our testing shows that a lot of people still want their creditor protection, even after consulting with an agent,” added Spence.

But even where mortgage brokers are now offering insurance, getting a client to commit to life coverage remains a challenge.

“We have said to brokers, in the past, that ‘hey, when you refer a client to an insurance agent without providing them creditor insurance, in many cases they`re putting off that trip to the insurance broker -- if they ever go at all. That means the client has no protection and the broker is exposed,’” says Benesure’s Spence. “Why not do both – send them out with the only insurance product mortgage brokers are permitted to offer, and then refer them to a life agent. That way they’re covered even before the mortgage closes and they don’t have to worry. If they ultimately get whole- or term-life coverage, they can then cancel their creditor insurance.”

Still, some brokers now hawking insurance are winning some of the highest conversion rates in the business, something their move to offer life has actually grown by building on client goodwill.

“We’re seeing conversions of about 70 per cent of our mortgage clients who are now taking out term life,” Terry Kilakos, owner of not only Verico North East Mortgages, but its newest offshoot North East Insurance Financial Services. “I think it’s because we have built up a lot of trust with the client in arranging the mortgage and that adds to our credibility in suggesting the insurance and because it’s coming from us they also have more faith in it.”

When Kilakos re-launched his brokerage earlier this year, he also made room for that in-house insurance agency, hawking life, disability and whole life coverage.

North East Insurance is actually run out of a building some two blocks away, with Kilakos having hired eight licensed insurance agents.

Where he has hired his insurance muscle, other brokers are beefing up themselves, taking on the time commitment needed to become licensed as life agents and then brokers.

One industry player in London, Ont., is now dually qualified as both a mortgage and an insurance broker, the latter involving a two-year commitment to study.

Ostensibly, that allows her and others like her to almost double the revenue on the same client – if that client opts for the kind of lucrative, if rare, whole-life coverage agents dream of.  

Still, mortgage clients making that level of commitment are themselves in the minority, something that may limit the ability of brokerages to keep an insurance agent on staff and happy.

In fact, it may be another reason creditor insurance providers are taking this latest broker trend in stride.

“Whole-life policies are what life agents are looking to get,” says David Young, president of Propel Insure, “but they’re fewer and harder to get and that may limit just how much they get from joining a mortgage brokerage.”

It’s one of the many reasons Young and Spence are encouraging brokers to make a deeper commitment to creditor insurance and to increasing conversions in order to broaden revenue streams in this slowing market.

“That opportunity is already there,” says Young. “Brokers already have the tools.”
 

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