Ensure clients know insurance options

The number of borrowers without adequate payment protection insurance is a cause for concern and something brokers should be tackling.

Recent research from Paymentshield helps explain the decline in sales of mortgage payment protection insurance. It finds almost half of consumers know about the Office of Fair Trading investigation into PPI but nine out of 10 mistakenly think this also covers MPPI.

Given the horror stories around PPI and its lack of value you can hardly blame borrowers for shying away from it. The fact that PPI can be sold by anyone from used car salesmen to staff in a local electrical shop doesn’t help.

And we are always hearing of cases whereby providers refuse to pay out on protection policies for whatever reason. Sometimes this is due to clients not being totally upfront during the application process or failing to understand what was asked of them. At other times the fault has to lie with advisers who fail to recommend the most appropriate products.

When I was buying my flat I was lucky enough to have a good IFA who explained the various types of protection on the market. I can’t say this was the most interesting conversation I’ve ever had and despite writing about financial services for far too long I found it hard to understand the difference between critical illness cover and income protection and what option I should go for. After sitting through an hour of mortgage advice the last thing people want to do is to go through the whole thing again concerning what cover to take out, if any.

Unlike house prices and buy-to-let, people are unlikely to discuss mortgage protection cover at dinner parties. When taking out my mortgage I opted for critical illness cover but know this has its limitations and can’t help wondering if it is worth the cash I’m shelling out each month.

The problem is there’s no protection product on the market that covers every eventuality and anyone who says there is is lying.

Another imbalance in the market that almost put me off taking any cover at all is the fact that it’s much more expensive for women than men. Despite my partner at the time being a smoking, drinking diabetic his cover was cheaper than mine. The only explanation the male IFA could give me is that more things can go wrong with women. He declined to go into details.

The situation won’t be helped by the recent concerns voiced by the Financial Services Authority about the sale of critical illness cover. The regulator found providers didn’t make an effort to ensure the cover was appropriate or explain how it works.

Brokers should realise they are in an great position to ensure clients are at least aware of the benefits of having the correct cover.