The decline in sales of mortgage payment protection insurance holds a certain irony for product providers. While most home buyers take out life insurance as a matter of course, only about a quarter are now prepared to protect them- selves against the more common risks of illness, injury or unemployment.And while most mortgage advisers would not consider an exchange of contracts before life cover is in place, many appear to be satisfied to allow their clients complete on a mortgage transaction without any payment protection being in place. The crisis of confidence in MPPI has been the subject of much debate and the finger of blame is often pointed at the recent bad publicity the protection industry has received. It is true that this unfortunate episode has caused lasting damage and the confusion created among consumers has left MPPI tarred with the same brush as loans and credit card schemes. But the image problem goes back to long before the recent poor publicity. Even in the late 1990s the high rate of rejected claims was beginning to unnerve some advisers and give the public the impression that MPPI was poor value for money. This perception is now widespread. Advisers see customers who have paid their premiums without fail throughout the years left without cover when a crisis occurs. Some of these people have simply been unlucky enough to be struck down by the sort of common illnesses that are not covered by many insurance policies such as back problems and stress-related disorders, or they might have fallen victim to one of the other exclusion clauses hidden somewhere deep in their policies. Even if they are entitled to payment, they may be shocked to find the sum falls far short of covering their mortgage payment because they were unaware it was means tested. The requirement by some insurers to instruct an independent doctor or consultant to assess the illness adds fuel to the fire of mistrust in MPPI. No wonder that many advisers and consumers have lost faith in the product. So how can we begin to turn the tide? While it is true that advisers have a crucial role to play in this, certain problems first need to be addressed by the industry. Ambiguously worded policies that fail to pay out on claims have damaged the reputation of MPPI. Insurers must take the lead and restore public confidence by focussing on cover-driven products. And advisers need to be convinced that the policies available on the market can deliver the protection their clients require. The difficulty for insurers trying to take this approach is that both advisers and consumers often compare policies on cost alone, without considering the level of cover on offer. This emphasis on headline prices has tempted some insurance companies to reduce premiums at the expense of cover levels to win a bigger market share. Their pursuit of short-term gain has been to the detriment of the longer-term health of the industry. But if insurers need to rebuild trust, advisers also need to shift the emphasis away from price and look at the levels of protection provided if they are to offer their clients best value. By opting for cover-driven products advisers are effectively covering themselves and also helping ensure longer-term client satisfaction. Unlike buildings insurance, MPPI is optional so cover is particularly important as those who opt to pay the premiums ought to be protected when they need it. Aside from the poor reputation of MPPI, there are other reasons why advisers are reluctant to pursue sales. After a typical two-and-a-half hour meeting with a client the mortgage and life cover have been usually applied for and with page after page of compliance documentation in place it is tempting to draw the meeting to a close. Even if they advise clients to consider MPPI, advisers need to provide appropriate advice to avoid the risk of mis-selling, and finding the right product can be a complex and time-consuming task. Does a self-employed applicant need unemployment insurance if his services are in constant demand or would he be best advised to take out accident and sickness only? Does the client’s employer provide comprehensive sick pay? And what about other considerations such as excess or deferred periods? At times MPPI may seem like yet another item on an already overcrowded agenda. But with compliance procedures now obliging advisers to ensure clients consider all possible risks, there are implications for those who fail to discuss the issue properly. Advisers must grasp the nettle and treat MPPI advice as an integral part of a mortgage sale. Insurers and networks can support them in doing this by providing appropriate training. Many networks automatically assume that their members have a good understanding of MPPI but this is not necessarily the case. Training workshops can give advisers the chance to refresh their knowledge and ask for expert advice on some of the situations they come across on a everyday basis. Training is a useful tool in boosting take-up as advisers who have a better understanding of MPPI will have more confidence to sell it to their clients. They will be better equipped to explain the benefits, overcome objections and select the best product for their clients’ needs. MPPI is a critical product for most mortgage holders and take-up must be boosted if we are to avoid a rise in the number of repossessions. The insurance industry can help achieve this by providing the right products, offering the right cover and by equipping advisers with the expertise and confidence to sell it.
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Richard Coulson, chief executive, Home of Choice
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