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Time for unsung benefits of MPPI to be driven home

Mortgage payment protection insurance has been the subject of much speculation about its future, how it stacks up to income protection policies and whether it has a role to play.

Unfortunately the acronyms for short-term income protection and long-term income protection, STIP and LTIP, sound like names of Ikea shelving units and not valuable aspects of an individual’s protection needs.

And since the concept became embroiled in the payment protection insurance mis-selling scandal, providers have been trying to distance the product by changing the name and de-coupling it from the mortgage.

But for those who have become unemployed or are off work through accident or sickness, the money and advice that these policies provide have been invaluable – benefits that probably never make the news.

On April 6 new rules came into being from the Competition Commission that suggest there is still a future for the protection product. After all why introduce rules rather than ban the sale of MPPI altogether?

For me it’s a simple sale. People know that they can be off work because they have lost their job – the age of austerity has bitten in some parts of the country and many would have been better off if they had had an MPPI policy. People still get sick and accidents happen.

The new rules are in place to give customers time to consider their options and the opportunity to shop around.

So long as the adviser has made it clear that not all policies are the same and the customer should not be comparing policies on price alone, there is nothing for advisers who quote on good quality products to fear.

The money and advice these policies have provided has been invaluable – benefits that never make the news

How are providers helping? Well many have updated their systems to guide users on the new rules and some have gone as far as to help with diary reminders. But ultimately it’s up to advisers to make sure their records are up-to-date, with a note of the mortgage or non-mortgage connection, date and time of quote, date of mortgage offer, date of follow-up and when the customer got the protection in place.

Intermediaries need to be more aware of timing than before but the key issue is to be aware of whether the customer needs the cover and is eligible to benefit from the peace of mind that MPPI can offer.

As providers will be writing to policyholders on the anniversary of the cover being taken out, there are bound to be questions raised about what the client feels they have been paying for and sellers need to be positive about the product.

It has saved many from repossession and made the impact of redundancy easier to manage.

Providers have helped them find a new job through CV advice and job databases, and with stress being included as a covered condition, it’s given consumers much-needed time to come to terms with the pressures of the economic climate.

The media reports cases where cover was sold inappropriately, but rarely report on those people kept their home and got back into employment with the help of MPPI.

There are too many customers financially at risk who need the help of an intermediary population that is awake to the risks the current economic landscape presents.

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  • Liz 26th April 2012 at 12:41 pm

    PPI has its place.

    However if possible for the accident, sickness and disability side I would rather arrange PHI for my clients plus a redundancy cover policy (stand alone, pretty much a thing of the past now sadly).

    However for someone with a very short term loan or above the age where providers will permit a new PHI policy PPI has its place.

    The main thing that gripes me is that banks still insist on selling PPI and life and CIC rather than PHI, redundancy cover, life and cic. Normally cheaper and much better cover. However it makes it easy for me to re-broke and beat their prices, but really why do banks not seem to offer PHI with mortgages? It should be a must for most people.

  • Jean Gray 23rd April 2012 at 1:24 pm

    Correct me if I’m worng but was it not the case in 1994 when the waiting period for SMI changed from 8 weeks to 39 weeks that this was done because those taking out a mortgage were supposed to ‘protect’ themselves against redundancy and sickness? We always need a safety net and bad selling of MPPI has to be addressed but please – somebody, somewhere, accept responsibility for your actions and then hopefully we will stop being a barmy litigious nation following behind the USA!

  • Des Platt 23rd April 2012 at 12:28 pm

    Agreed. When I worked for Nat West , I consistently argued that PPI should be monthly premium rather than added to loan with interst being charged on premium.However,we were encouraged to sell it properly and do thorough questionnaires as to eligibility. There are many things I will criticise my former employer for but that is not one of them. I suspect many of the people complaining were sold it properly and in fairness, I always found Nat West personal loan protector were good payers.

  • Wornout 23rd April 2012 at 10:24 am

    I whole heartedly agree,what about the thousands of people who’ve made a valid claim against MPPI and it has saved them from repossession? Much the same goes for valid claims agaist PPI. I acknowledge some institutions “oversold/mis-sold” M/PPI but not all! Providers should challenge the claims more rigourously.

    The next scandal will be clients being encouraged (by scumbag ambulance chaser firms) to claim against their adviser for NOT advising them they could protect themselves against losing their income due to accident sickness and unemployment.

  • Paul Cullen 21st April 2012 at 2:36 pm

    Good article protection has to be a must. How the FSA have not called unprotected lending,irresponsible lending is beyond me. David Cameron had a mandate to reduce state benefits.How many borrowers and how many millions are being paid out because the borrower, did not have Life,CIC or Income protection ? Further to that those receiving state assistance would be on Interest Only. The very monster the FSA twittered on about is a result of their failure to act.Its a joke and while not addressed will cost the state millions more yet>!

  • Peter Turner 21st April 2012 at 10:00 am

    The old MCCB Good Practice Notes say, on page 14,

    “The importance of this issue cannot be ignored. Customers are to be advised of the options available to safeguard their income and mortgage repayments and the advice should take account of and be tailored to their
    individual circumstances. Although the importance of protection insurance cannot be stressed highly enough, it is also important that customers are not oversold protection, especially where they already have some protection in force. If customers do not wish to take up protection insurance, it is ‘good practice’ to have them sign a disclaimer to that effect.”

    It does then explain the circumstances in which single premium MPPI is permissible but in most cases this is the basis of your defence against allegations of MPPI misselling. That is, of course if the policy the ambulance chaser is complaining about really was PPI. In all the cases I have come across they have been PHI, CI, TA or not existed at all.