Fast-rising rates. A staggering drop in mortgage applications. Skyrocketing inflationary costs. Falling stocks and layoffs making headlines for mortgage giants across the industry. The entire mortgage market is in flux like few times in history.
As the lending arm of mortgage companies can no longer depend on new loans or the rate-based refinancing that’s kept them afloat throughout the pandemic, the value of mortgage servicing rights is serving as a lifeline.
The short-term solution? Selling mortgage servicing rights for an influx of cash that, amid other cutbacks, can help mortgage companies survive what could be a prolonged period of volatility. Of course, for the ones forced into this decision, that means giving up a steady revenue in hopes of a strong return for mortgage origination in the not-too-distant future.
However, for servicers as well as lenders with a healthy servicing portfolio, the changing market environment can be a time to thrive — to expand and strengthen revenue streams outside of just mortgages.
That’s why, today, the future of mortgage companies isn’t in mortgages at all. Rather, it’s in augmenting the traditional, existing servicing offerings — market proofing the business to align with the services that customers have always needed.
The simplest value-add that can impact your bottom line? Insurance
Why insurance? First, every customer who will ever need a mortgage also needs home insurance as it is impossible to obtain a federally backed home loan without it. These customers may be paying too much for insurance or looking to switch providers or coverage. Even with demand for insurance that’s built into the mortgage process, insurance offers a few key strategic advantages for mortgage lenders.
Integration is now seamless
“Embedded insurance” is changing what it looks like to shop for insurance. Traditional insurance starts with a time intensive “quote” — a ballpark estimate that’s subject to change. Sales are commission driven, driving up the price. And it takes a lot of time and paperwork to actually purchase coverage. For most people, it’s not a great customer experience.
With an embedded insurance company as a partner, insurance buying is digital first. API integrations use data and automation to enable mortgage companies to offer insurance as part of sign up flows or existing processes and platforms that customers already use to get a mortgage. So, for customers, adding insurance becomes a painless process. It’s an easy add-on. A simple button. A price and a click. They no longer have to leave the mortgage experience and purchase insurance as a totally separate transaction.
Mortgage companies already have the existing data and trust
With each loan serviced, there’s a baseline level of trust established. Mortgage companies maintain a monthly line of communication as part of the customer relationship. While that’s a natural opening to cross-sell products from a wide range of partners, no business wants to spam or bombard their customers with unwelcome offers.
Insurance doesn’t carry that same risk. Since mortgage companies already have inside information into what their customers are paying for insurance and the amount of coverage they have, it’s easy to be selective in targeting offers to people who will see significant savings or truly benefit from additional protection.
So, why haven’t more mortgage companies successfully partnered with insurance companies?
If a mortgage company can only offer standalone home insurance, the average customer hasn’t seen enough savings to motivate them to switch. The real savings is in bundling. On average, Americans who bundle their home and auto insurance save 16% annually — which adds up to hundreds of dollars in household savings each year.
The added layer of complexity it takes to bundle home and auto coverage has only been possible via the traditional insurance process, which isn’t set up for easy integration with mortgage companies, despite the difference in savings being made up for in partnership incentives or discounts alone.
But that’s all about to change.
Branch just raised $147m in new Series C funding to accelerate its 100% digital quote-to-bind bundling experience. It’s the first ever insurance provider that can instantly bundle home and auto as embedded insurance — letting customers combine their home and auto insurance to maximize savings, customize their coverage in real time and checkout in seconds online.
And Branch is already available to more than half of the U.S. population and spans coast-to-coast, finally making embedded insurance a realistic option for mortgage companies.
Bundles are the final step in unlocking the insurance revenue stream
When customers can find bundled insurance savings in the moment they actually need insurance, the choice is simple. They get the exact coverage they’re looking for for less money in a frictionless experience. This is an offer mortgage companies are uniquely positioned to make.
For companies that can capitalize on embedded insurance bundles, it means effortless loyalty, revenue and growth. The advantages are clear:
- Opens a new revenue pipeline
It’s more than incremental revenue. It’s consistent, stable revenue. Bundled insurance through Branch has already provided 8-10x increased conversion for mortgage partners compared to insurance companies who embed only home insurance.
- Lowers the cost to service
New revenue from bundled insurance policies helps offset the overall cost to service.
- Increases customer retention
Customers who bundle aren’t just happier, they’re stickier — their bundled policies are tied together to their mortgage, which means they are less likely to move their mortgage and walk away from the added savings.
Yes, we’re living in an uncertain, unprecedented time for the mortgage industry. Yet for mortgage companies that take this time to evaluate the right partnerships and product offerings, the opportunity is unprecedented, too.
To learn more about what lenders can do to thrive in a turbulent housing market, visit branch.com.
