Questions of choice and clarity in cover products

With the festive season fast approaching, two of the items on brokers\' Christmas wish lists must be a thorough cleaning up of the payment protection insurance market and more of accident, sickness and unemployment products.

While most intermediaries have being doing all they can to meet the Financial Services Authority’s mortgage rules and, in the main, meeting the regulator’s requirements, the reputation of PPI remains tarnished.

There have been repeated warnings from the regulator that firms must ensure their selling practices are compliant when it comes to PPI, but the situation is not improving.

This means that organisations like Which? continue to have to defend customers and the personal finance pages of the national press continue to be filled with horror stories about people paying extortionate amounts for PPI that was not necessarily appropriate in the first place.

While my most recent experience of PPI was not to do with mortgages it did show me how many hoops mortgage brokers have to jump through compared with other sectors, when it comes to selling insurance.

I was buying a washing machine in Curry’s – that’s how glamourous my life is – and somehow let the salesman convince me I needed PPI to cover the loan.

Although I can’t say I was conned and I did go home with all the necessary paperwork, I wasn’t offered an explanation of the PPI or asked to read any of the documentation before signing.

It turns out the washing machine will cost me almost double the original price because of the PPI. I probably should have thought more about what I was doing, but who can be bothered when they just want to get out of a shop?

Turning to ASU, there is still a limited choice available and many intermediaries either don’t have the qualifications to advise on permanent health insurance or the confidence to do so.

This means borrowers are still being lumbered with bog-standard policies that won’t pay out for some of the most common ailments such as bad backs or stress.

But a product was launched earlier this month, marketed by Commitment Protection and underwritten by Holloway Friendly Society, that is claimed to bridge the gap between ASU and PHI.

ASU characteristically has a limited benefit period – usually 24 months at the most – a unified premium structure and limited under- writing at the point of sale.

PHI, on the other hand, offers cover until return to work or retirement. Premium costs vary according to personal factors and full underwriting is available. But due to this complex structure, PHI tends to be sold by IFAs.

The new product could avoid mis-selling issues by combining aspects of ASU and PHI.

But this is just one product and much more must be done by the industry to ensure people have access to cover that will actually pay out when needed.

Maybe, now mortgage regulation is more than a year old, the industry should focus on sorting out some of its other problems.