How to be an insurance superhero

So, I’ve been doing some research around creditor insurance. I’ll be honest, I haven’t looked at this for a while and I mean the exact pricing. Back in the day, I used to work inside a Freedom 55 office helping all the Advisors with their insurance business. And, invariably I’d get a few people coming in with mortgage insurance clients.

I remember looking at the numbers and they were close. We still had a better product, but the price of the creditor insurance was either cheaper or pretty close. And, mortgage insurance was easier.

We won some cases of course. But, it wasn’t the same.

Things have changed.

I don’t know if you’ve seen the new prices of what it costs to buy mortgage insurance through a bank or mortgage broker.

But, it’s quite literally insane.

It’s not even close anymore and the banks clearly don’t care. They see a customer that has very little financial knowledge and may not have an Advisor and who just wants a house and will sign anything. They see an easy target. So, why not increase the premiums, so that it goes directly to their bottom line.

I mean, if I was the bank, I’d be doing what they’re doing. It’s smart. They get more money.

Is it ethical? Is it good for Canadians? No, but it is business.

Just so you know, I ran the numbers for the 5 big banks:

TD, RBC, BMO, Scotia and CIBC. The costs are all the same, except Scotia is a bit of an outlier in terms of costs.

So, let’s say I was a 35 Male looking for a mortgage for $500,000, what would I pay in terms of mortgage insurance?

Well, let me tell you:

The cheapest is with CIBC for a whopping $65 per month and the most expensive is Scotia at $90 per month. This is insane.

What pray tell you is an individual contract?

Well, I’m glad you asked:

• Term 10: you ready for this? $23.70.

• Term 20? $33.27

• Term 25 (probably the length of the mortgage): $44.79

• And Term 30 taking the client all the way to 65: $60.30

And, by the way, the individual plan will renew, is convertible, you can set any beneficiary you want (not just your greedy friendly bank to take all the money) and it’s fully underwritten (this is big, because we don’t know how often banks decline claims).

So this is a no brainer right?

Let’s say you bought a joint policy with say a 35 Male and 35 Female, how much would we pay?

The best price of any bank is $110 at CIBC. And, the price of Term 25 is: $74.67.

Now, I’m gonna go out on a limb here and say that CIBC will likely be increasing their rates on insurance soon, to match their competitors.

What about an older borrower? This is where it gets interesting.

Let’s say you had a 55 Female who got a $500,000 mortgage (it can happen), what are we looking at in terms of costs.

TD is the winner here offering their insurance at a steal of only $260 per month. And, what is a T10: $81.

If that person held the insurance for only 10 years, they’d overpay by a whopping $21,480 for an INFERIOR product.

And do you wonder why the banks continue to be some of the best investments in every Canadian’s portfolio. They are extracting huge streams of income from people who can afford it the least.

I heard a rumour back in 2013. This was the rumour:

CIBC had sold 200,000 CI policies that year. If you add every CI policy sold in the individual market, it’s not even close to 200,000 per year and that includes every Advisor at every insurance company.

That was 2013, how many CI plans do you think they sell today? How many life insurance policies do you think they sell today?

And now the banks have gotten so comfortable with their process, they have jacked the insurance rates to new levels, to make that line of business even more profitable.

If you aren’t angry about this, you should be.

But, I want you to propel that anger (not into angry Twitter comments and LinkedIn posts), but let’s hurt the banks where it matters.

In their bottom line.

Let’s take the business back, because in all honestly, we never should have lost it.

The way we take it back is by shining light on the facts.

We have a better product. And, its cheaper. And not by a little, by a lot. The difference in T10 costs versus mortgage insurance costs is now multiples. Someone could end up paying as much as 5x the cost monthly for the duration of their mortgage.

And, we didn’t talk about the fact that mortgage insurance is a declining balance product, so the payout will be less than they initially bought (unless they die on Day 1).

When has this ever happened?

This is pure insanity and you have the power to reverse it.

All you need to do is ask all your clients if they have mortgage insurance. If they say yes, you tell them that the banks have massively increased the cost of insurance on their products, while the insurance industry has been decreasing prices.

Here’s a good education for everyone. When interest rates go up, you typically see insurance costs decrease, assuming everything else constant. This is because insurance companies can take that premium and invest it at higher rates.

Now, it doesn’t happen overnight, but overtime it does happen.

This is the opposite with mortgage insurance. Those rates should be coming down, but instead they are moving upwards.

Think about this for a second.

If you had a client who never got a second opinion, was eager to close the deal and you can increase the price on them and let’s be honest, you didn’t really care about your clients.

What would you do?

Well, if you a multinational, multi billion dollar company that reports to shareholders that want growth and you had a team of lobbyist hitting the streets.

You might do what they are doing.

It’s just business. But you have a better relationship with clients than a bank will ever have. Because, you have a unique personality, you have a code of conduct to hold up and you have ethics.

But, you also have an opportunity to use your relationship, your credentials and your expertise to tell people that they are throwing money away.

And, this hasn’t been lost on me, but people probably need more than just their mortgage covered with an insurance policy. They probably need more coverage and you are in a position to get them the right amount.

Here’s what I want you to do Monday after the weekend:

Send out an email to all your clients about the increased costs to mortgage insurance. Tell them the banks have recently substantially increased the cost of mortgage insurance products, potentially to offset their “provisions for credit losses” (PCL). But, tell them the good news is that individual insurance products have seen decreases in price this year due to the higher interest rates. And, that you can likely save them significant cash flow that can be further directed to their short, medium and long-term financial planning goals.

I bet you’ll get a bunch of people that will take you up on that offer. Everyone is looking for savings these days and if you can swap out an inferior product for a superior product at lower costs.

You’ll look like a superhero. An insurance superhero. My favourite kind.

Until next week,

Andrew