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Protection news
MPPI
mistakes:
FSA expects others to follow lead
Paymentshield's Sandy
on single premium PPI
McPherson comments.
I have been concerned to hear The move by Alliance & should be told how the product
be outlawed and urge the rest of
that some brokers are still not
Leicester, Barclays, The Co- works, what it covers and how
the industry to follow suit.
bothering to discuss mortgage
payment protection insurance
Operative Bank, Lloyds Banking much it costs - especially as the
“We share the FSA's concerns
(MPPI) when recommending new
Group (including Lloyds TSB, cost of the PPI is added to the
about adding the loan and PPI
mortgages or remortgages to Halifax, and Bank of Scotland), loan and interest charged on this
premium together because it
their clients in the belief that
and RBS/Natwest to stop selling amount.
attracts higher rates and feel that
most people cannot afford it at
present. This is a big mistake
single premium Payment Jon Pain, FSA’s managing direc-
this should be prohibited. There
that could prove very costly for
Protection Insurance (PPI) with tor of retail markets, said: “We are
are other premium financing
the intermediary and the client. unsecured personal loans by the pleased these firms have stopped
facilities available which allow the
There is no doubt that the
end of January 2009 has been selling single premium policies
consumer to switch to monthly
current economic climate has
many people counting the
widely welcomed. and would expect other firms to
premiums and offer the consumer
pennies. And, to some extent, I
Some of these firms, along with notice these developments and
more choice and control.
can sympathise with brokers that other market players, now offer or review their own positions. A PPI
“PPI is a useful product, and
are baulking about raising the
plan to offer regular premium PPI product can be helpful for cus-
consumers need to assess if it is
matter of protection insurance. It
could be that they are wary about
instead of a single premium prod- tomers wanting protection on a
suitable for their individual
coming across in a bad light as
uct. The FSA expects other firms specific credit agreement, as long
requirements and need to be
they might be seen to be still selling single premium PPI to as the policy is sold appropriate-
aware that cover is available, and
attempting to load products onto
take note of these developments. ly.”
often cheaper, from providers
clients at a time of economic
hardship.
The FSA said that it recognises BIBA head of technical services,
other than from where their loan
Similarly, the recent rumpus
the importance of appropriate Peter Staddon, commented: “This
was purchased. I strongly recom-
about payment protection protection insurance in the cur- is a valuable first step towards
mend that individuals looking to
products in general has left the
rent economic climate, but providers accepting that single
purchase this cover contact an
public very reluctant to take out
this insurance.
remains concerned over the stan- premium payment protection
insurance broker or intermediary
But it is the duty of the broker
dard of sales of single premium insurance (PPI) is bad value for
who specialises in PPI rather than
to explain to the client what PPI. It believes that customers the customer. We believe that sin-
choose a policy which is tied to a
remedies exist should they
being sold this type of product gle premium PPI policies should
loan.”
become unable to meet their
repayments due to accident,
sickness or unemployment.
Failure to do so could leave their
client facing the horrors of
repossession and leave them
Customers cut back on cover
liable to possible future legal
action as there may be a claim
that the client was not treated
As a result of the credit crunch, ance business and their customers. “In today’s economic climate,
fairly when sold the mortgage or over 90 per cent of brokers sur- Phil Kennedy, business develop- choosing the lowest price option
remortgage.
The broker should also explain
veyed by Legal & General said that ment director, for Legal & regardless of brand or cover
that MPPI is a very different
their customers are trying to General’s general insurance busi- could be a false economy. By
creature from single premium
reduce the cost of their home ness said: “Worryingly these find- recommending cover from a
protection products that have insurance cover to save money. ings support independent secure and trusted brand, advisers
acquired such a bad reputation.
Basically, if a client can afford
Worryingly, 62 per cent of bro- consumer research we recently can give customers confidence
a mortgage then they can afford
kers believe that underinsurance is conducted that highlighted that 32 that their home is sufficiently
to insure their mortgage
now a major issue and nearly half, per cent of people would consider protected should the worst
payments and in turn protect 47 per cent, were concerned that shopping around for cheaper happen.
their home. At roughly £4.50 per
hundred pounds of mortgage
their customers could be underin- household insurance cover to save “Household insurance cover is
repayment. It's a small price to
sured by as much as 10 per cent. money. So it would appear that it not a luxury purchase. When home
pay for peace of mind in these
The new research from Legal & is now more important than ever contents cover can be provided for
very uncertain times. Brokers, General’s general insurance busi- for advisers to continue to check as little as £10 to £20 per month,
too, cannot afford to overlook a
valuable source of commission
ness asked brokers what impact the that their customers do have ade- which represents good value, even
income.
current market conditions were quate household insurance cover when household budgets are being
having on their household insur- in place. stretched.”
February 2009 Mortgage Introducer
www.mortgageintroducer.com
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