We deal with a lot of lenders that have a requirement to sell insurance on their lending products. It's a big money maker for the financial institution and there is a lot of pressure to have high insurance penetration numbers. The challenge is that many lenders are "untrained" when it comes to insurance sales. They go into it with a bad attitude that affects their ability to sell. To begin with, they feel like the insurance is overpriced so that affects their ability to talk about the products with any real conviction. The big attitude that gets in the way however is the belief that they don't want to come across like a pushy sales person, let alone a pushy insurance sales person. When these attitudes take root in a lender it's disastrous for their insurance sales. They start to short cut the sales process. They make a half-hearted attempt to explain the benefits of insurance, and if they do a really good job, they mig ht tell a sad story about someone that didn't take the insurance on a loan and what happened to them. In extreme cases of "untraining" we see people present the insurance by saying something crazy like, "You probably don't want the insurance do you?"
On the other end of the spectrum, it's shocking to see how much energy some lenders put into trying to talk someone into taking the insurance. That makes no sense especially when you consider how many people are worried about sounding like a pushy insurance salesperson. Why set your process up to make you sound pushy by putting the emphasis on your ability to persuade?
Here's a thought: instead of trying to talk the client into taking insurance, get the client to talk you into how they will be making their payment if they are dead, or off work because of a disability.
Think about it. To determine if the client qualifies for the loan you have to ask a lot of very personal questions. You ask a lot of questions and then you don't even believe them! You make them prove what they are telling you is true (income verification). Why? All because you want to ensure you're going to get your money back. Here's the interesting part however: when the client waves off the insurance and they tell you that they will continue making payments - even if they are dead or disabled - you believe them! How does that work!?
Ask more questions
Doesn't it make sense to ask just as many questions of a client when they decline insurance as you do when they are applying for the loan? Question them as to how it will unfold after they are off work or how their family will cope when they are gone. Don't take any fluffy answers from the client like, "I'm covered at work". Dig into it with questions like:
* How will you be covering this payment if you're off work or, heaven forbid, pass on?
* How will your family cover it?
* If they sell the home/farm, then what - where will they live?
* Does your wife work? So she'll have to start working and caring for kids all at the same time? How will she manage?
* You're covered at work - excellent - tell me about that policy. How much is it worth? Is that what your family will have to live on? When you set that policy up did you factor in this new debt you are incurring?
Most won't be able to explain
When they can't come up with a reasonable explanation as to how they will cover the payment should something happen to them, break down the cost per week for insurance and say something like, "Mr. Client, for less than 25./week we can make this debt go away should something happen to you. It doesn't sound like you have great plan on how to take care of it, why don't you let us make the payment should something happen to you? Wouldn't you feel better knowing your family doesn't have to worry about it?"
Some think these questions are hard. They worry because they might feel a little awkward for a few minutes or they might make the client feel bad.
Here's what's worse: not getting them to associate with the realities of declining insurance. That's mean, unfair, and unprofessional.
Ask any lender who has had to have "that" conversation with the spouse of a client that died. You know the one where they have to tell them that the mortgage was not covered and that they are on the hook for payment. It's no fun. Typically, these lenders tell us that they have to have that conversation once and then they get busy and figure out a better way of presenting insurance. They want to avoid another one of those meetings at all cost.The awkwardness of asking a few of the questions described here pales in comparison to the unpleasantness of telling a wife she has to still make the mortgage payment within days of learning her husband has died.
So, spend as much energy getting the client to explain how they will make the payment if they are dead or disabled as you do when you're trying to figure out if they qualify for the loan. You owe to everyone concerned to have a plan and to get good at this.