the new policy will be to encourage indebted homeowners to consider selling. Of course, this way the lender gets


more of their money back quickly if the housing market does tank. But is the customer getting the best deal? And who wants to be in a forced position to sell the roof from over their heads?


lACk of suPPort This change in attitude toward unemployed mortgage borrowers is echoed in the stance taken by the new Conservative government. From October it is to slash the support available to these unfortunate customers through the Government Support for Mortgage Interest scheme by cutting the interest rate that the government covers from 6.08% to the Bank of England’s average mortgage rate, about 3.5%. This could trigger a surge in repossessions that would drive the housing market further down and put other homeowners in a position of negative equity. This all adds up to a lot of worried


homeowners that will be seeking to protect their income should they find themselves unemployed through no fault of their own. It also presents an opportunity for


intermediaries to step into the gap left by lenders and offer a solution to this problem. The numbers of customers signing up


to traditional PPI cover has been falling away in recent years and it was clear a product rethink was needed. Clients can now opt for full ASU, AS only or U only cover and select how much cover is required to suit their personal needs. This could be crucial to the success of this new generation of cover with the public sector expected to bear the brunt of widespread redundancies. Traditional one-size-fits-all policies do


not reflect the benefits packages of public sector workers, which can be very good. For example, many receive full sick-pay for six months, and so a policy that allows them to select a longer qualification period until they start to receive claims payments for accident and sickness compared to unemployment means that they can keep their premiums to a


minimum rather than paying for cover they may not actually need. Cost, flexibility and suitability of cover


are key issues for consumers and so it makes sense to introduce a specific scheme that delivers on all these fronts for public sector workers. Paymentshield chief executive Tim


Johnson says: “It’s all about putting the customer in charge of where they want to spend their money. What’s considered to be an essential outgoing will vary; some people will prioritise their mortgage payment whereas others can’t live without Sky TV or their mobile phone. Ideally enough monthly benefit would be


The Competition Commission last month released a report consulting on changes to the way retail Payment Protection Insurance (PPI) is sold. Retail PPI relates to protection policies taken out on repayments for goods bought from home catalogues. The document puts forward a number of proposals for retail PPI that aim to provide clearer information to customers on the cost of retail PPI cover and the rights they have.


Proposals for retail PPI published in the report include: • an obligation to offer PPI separately


selected to cover essential outgoings and if your customer has budget to protect “luxury” spends then this can be covered too.” Insurance broker trade body BIBA


believes the probable point of sale ban will mean its members “have an opportunity to play a major part in shaping the way this type of protection is sold” and suggests the POS ban is not extended to cover situations where lenders work with retained brokers. The CC will publish its final decision


on whether to implement the point-of- sale prohibition on all forms of PPI in the autumn. n


from merchandise cover if both are offered as a bundled product • an obligation to provide information about the cost of PPI and ‘key messages’ in marketing materials • an obligation to remind all active customers of their cancellation rights and of key messages on an annual basis • a prohibition on the sale of single- premium PPI policies and on charges which have a similar economic effect • an obligation to provide customers who have spent more than £50 on retail PPI premiums in the preceding 12 months with a written annual review of PPI costs.


mortgage introduCer SEPTEMBER 2010 37


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