For such a tiny part of the home loan protection market it's rather surprising that single premium mortgage payment protection insurance can generate so much controversy.
That is of course, until you look at the rogue advisers that are touting this product to unwary clients.
As we investigate in our cover feature starting on page 23, there'd be no love lost if single premium MPPI could be driven out into the protection wilderness – along with all those that sell and promote it.
Single premium MPPI has many similarities to its more popular regular premium sibling. It is designed to cover the monthly mortgage payment and typically pays benefits for up to 12 months if the policyholder makes a successful claim for accident, sickness or redundancy.
Premiums are quoted on a flat rate per £100 of mortgage and there is no individual underwriting. Benefit levels and exclusions, similarly.
But the key difference is that the single premium covers the first three to five years of payments and is paid in a lump sum upfront, added to the mortgage and repaid over the life of the loan. Not only that, but commission on single premium MPPI can be as high as 70% or even 80% of the initial premium.
As Simon Burgess, managing director of MPPI provider Goodfellows, points out, this makes it a questionable product and one that is “only really sold by unscrupulous and dubious brokers”.
“Basically, it is scandalous,” he adds. “A total rip-off and unacceptable under any circumstances.”
The danger of adding the cost of cover to the value of your client's property in an overheated housing market is more than obvious. It increases the homeowner's overall borrowing and reduces their equity. And anything that narrows the difference between the mortgage and the value of the property can't be a good thing as it leaves your client vulnerable to negative equity if prices do fall back.
Pending regulatory changes should help clear things up, driving sharks from the market.
Almost four out of five still have no form of MPPI, and nearly two out of three have neither MPPI nor critical illness cover. If the mortgage industry is to make further inroads into these figures and hit its target of 55% of homeowners having cover, it needs to make sure the policies it sells, and the way it sells them, are without controversy.