Paymentshield plans to claw back MPPI commission from brokers

11 January 2010 | By Natalie Thomas

Paymentshield is refunding cus-tomers for premium hikes on mortgage payment protection insurance and intends to claw back the commission paid to brokers.

Many insurers raised their premiums on MPPI products last year as unemployment spiralled and the number of claims rocketed.

Insurers stated that they had the right to review the cost of prem-iums within their terms and con-ditions but failed to disclose this in Key Facts Illustrations.

The Financial Services Authority ruled in October that this was un-fair and agreed a package of meas-ures with the industry including customer refunds of around £;60m.

Firms were also ordered to undo their price changes and reverse any reductions in cover.

Paymentshield has now written to brokers informing them that additional commission paid as a result of premium increases will be clawed
back.

The MPPI policies affected were underwritten by Aviva, which increased premiums by 20% last year.

Brokers will still be paid full commission on the orig-inal premium and will also be paid commission on any reinstated policies.

Tim Johnson, chief executive of Paymentshield, says: “MPPI premiums increased this year due to the rapid rise in unemployment claims as a
result of the recession. It’s important that our customers have clarity about when and how their premiums can be varied so we are pleased to issue revised terms.”

Assurant Intermediary says it will not take back commission from brokers on policies on which customer refunds are being paid.

Nigel Payne, managing director of Assurant Intermediary, says: “It seems like penny-pinching to claw back this money. We have sent clients the full refund and will not claw money back from brokers.

“To do so could undermine their businesses.”

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