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Manulife & MPP—Opportunities for Brokers

manulife-benesureThree weeks ago, Manulife bought Benesure. Benesure sells the Mortgage Protection Plan (MPP), the most popular creditor life insurance product sold by mortgage brokers.

As the dust on this deal settled, we wanted to better understand two points:

  1. Why should someone take MPP over regular term life insurance?
  2. How might the wedding of Manulife and Benesure impact mortgage brokers?

For answers, we spoke with Wally Thompson, Manulife Financial’s VP Client Relations and Business Development, and Rich Spence, MPP’s VP of Sales.

In talking with them, it became apparent that brokers could end up getting more Manulife products to sell than just MPP insurance. There’s even a chance Manulife could distribute its mortgage products through brokers, which would be a major win for the broker channel.

We asked Thompson and Spence five questions:

1) Will mortgage brokers benefit from this deal?

Wallace said: “The reason that Manulife is purchasing Benesure is really to grow. We’re looking at the great growth and product that Benesure has, and we want to add to that. We are committed to the broker channel. With that commitment will come investment.”

Wallace added, “it’s certainly a likely outcome” that brokers will have additional Manulife products to sell down the road.

2) Might brokers someday be able to sell Manulife mortgage products?

Wallace: “The answer to that would be ‘yes,’ there is a chance…We’re looking for more opportunities here…It’s something that we need to work on as we understand the channel better and the opportunities…But [distributing mortgage products through brokers] is certainly a logical one for us to look at.”

Side note: The broker channel would welcome Manulife with arms wide open. Brokers crave mortgage products from deposit-taking lenders, especially given the recent loss of FirstLine. Those products are often more flexible than products from non-deposit-taking lenders who rely on securitization. Manulife has a strong mortgage line-up and its rates are usually competitive—e.g., 2.95% for a 5-year fixed currently.

3) Will Manulife market its own mortgage products to insurance clients referred by brokers?

Wallace: “We would never do that. As you can appreciate, we work with advisers in many different channels and we’ve built our business over 125 years with the adviser channel. We would not use information provided through the mortgage broker to cross-sell any products that they would not be a part of.”

4) What are MPP’s key benefits when compared to mortgage insurance from a bank?

Spence listed two main ones:

a) Portability – “Our MPP product is portable, so regardless of where the consumer goes with their mortgage over the life of their mortgage, MPP insurance goes with them.”

Even if a broker-referred client switches to a non-broker bank (like RBC), that client can keep his or her MPP policy and keep the same premiums.

With creditor life insurance from banks, Spence says consumers are stuck with that bank if they want to keep its insurance. That’s because switching lenders means they’d have to get a brand new creditor life policy elsewhere–which could easily cost more as they age, especially if they get sick or are otherwise less insurable.

b) Pricing – “We do competitive analysis on our pricing and MPP is generally the cheapest form of insurance that we see in this market today.”

5) Why should someone choose Manulife’s MPP product over its term life insurance?

Spence: “We look at term as being an income replacement product whereas creditor MPP is debt protection. So when consumers are meeting with a broker they might already have a term policy, and now they’re incurring new debt. The term policy…is to protect their income. The creditor life is to cover off the new debt.”

Spence also notes another difference between MPP and term life insurance. “With MPP…the premiums stay the same for the life of the mortgage whereas with some term products, at certain stages…the pricing changes as you get older.”

By contrast, Spence says: “If you buy term insurance for the life of your mortgage amortization period (e.g., 25 years), the MPP product over that time period would have a less expensive premium overall.”

CMT: Just keep in mind, MPP premiums may be cheaper but they also entail a declining payout since MPP covers only your mortgage balance—which typically declines as you make payments. That said, there are more insurance choices than just MPP and term life. It’s best to have an unbiased and licensed insurance professional compare the net benefit (i.e., total cost versus hypothetical payout) of all insurance options, based on your personal circumstances.

Rob McLister, CMT