ABI concern that MMR could put cover at risk

The Association of British Insurers has warned that the move to a more intensive mortgage application process under the mortgage market review could hit protection sales.

The FSA’s MMR consultation paper, published in November, said while lenders should bear ultimate responsibility for assessing affordability, it is up to mortgage brokers to continue to obtain information about an applicant’s income and spending and gather all supporting documentary evidence.

Brokers will also have to ensure a mortgage is appropriate to the applicant’s needs and circumstances.

Speaking at a Bright Grey and Scottish Provident debate on critical illness in London last week, ABI assistant director of health and protection Nick Kirwan said that while the RDR represents an opportunity for protection business, the opposite is true of the MMR.

Kirwan said: “The MMR is a very big threat. The thrust of the MMR is to put much more of an obligation on advisers arranging mortgages to ensure that clients can really afford the mortgage they are taking out. That means much more forensic analysis of the client’s income and their expenditure, which is going to mean much longer mortgage sales. That leaves the question, how much appetite is someone going to have at the end of that process to talk about protection?”

Master Adviser senior partner Roy McLoughlin says: “The problem is clients only have a limited amount of time they are prepared to spend with an adviser. If we are elongating the process, the danger is it is going to put people off.”

But Highclere Financial Services partner Alan Lakey says: “It is a drawn-out process already, never mind after the MMR. I get around it with a mortgage enquiry form that mentions protection on the first page. That allows me to have the protection conversation I want.”