Situation: Our agency has several thousand personal lines insureds, and we have written mortgage reduction life insurance-reducing term-on many. But we're not writing much of anything else in personal lines life or health, partly because our life producer is uncomfortable with that market.
I know there's more to life than reducing term, but what can I as agency president-not a life expert at all-do about developing more business from that potential? (Our commercial accounts are handled well by other life producers.)
Solution: Any single-need policy should be seen as an opportunity-maybe even an obligation-to review all of the client's life/health needs. From such reviews other business will develop. The homeowners or personal lines market should be seen as a potential for across-the-board life service in the broadest sense, including (but not limited to) total family needs, life and health coverages, retirement planning, savings and investment planning (if expertise and licensure in equities permit), gifting, charitable contributions, and so on. That market should not be seen as a chance to write mortgage policies and go no further.
Some agents use Universal Life as a means of addressing mortgage-redemption needs, with a possibility of shortening the mortgage-payment period and saving interest dollars. Disability income is important, too, in discussing mortgage coverages.
Mortgages also offer several other chances to deliver services and create profits for the agency. Since mortgages involves involve (1) big dollars and (2) many unknown factors and calculations befuddling mortgage-holders, some businesses have developed to help save money and clear away some unknowns.
Here are a few you might consider:
- Audit mortgage data. Recently, attorneys general of 14 states claimed that more than 28 million people with mortgage escrow accounts were being illegally overcharged by billions of dollars. One-quarter to one-half of all adjustable rate mortgages (ARMs) contain errors or miscalculations, it has been charged.
Companies that offer to audit records have found errors in the $400 to $1,200 range, although refunds as high as $20,000 have been reported. Payment reductions following corrections can save consumers $100 per month on a $100,000 mortgage, it is reported, or $1,200 per year.
In some states, lenders are beginning to pay interest on escrow funds held for taxes, insurance, or other items.
- Increased frequency of payments. Firms offer to set up programs to create twice-monthly mortgage payments instead of once-monthly, thereby saving impressive amounts of interest expense.
- Accelerated reduction of principal. It is widely known that mortgage interest is greatly reduced by prepaying some principal, but many folks fail to take advantage of this simple strategy. There seem to be two stumbling blocks:
1) People don't know how to confirm that the right amount was applied the proper way by the lender.
2) They don't have a practical way to check on the total result after a number of such prepayments.
Now a firm has developed a computerized, easy system to handle the entire process with precise, to-the-penny computations. It is seeking P/C agencies to distribute the product through multi-level marketing programs.