Banks and building societies misselling and over-pricing Mortgage Payment Protection Insurance (MPPI) are responsible for a downturn in sales, says Simon Burgess from independent provider British Insurance.
Recent figures reveal a steady decline in buyers of MPPI cover of 18% took out policies in 2007, compared to 25% in 2005 and 34% in 2000. Those who continue making longer-term payments has also spiralled to 18% in 2007, 21% in 2005 and 22% in 2001.
Burgess comments: “I am concerned that 82% of those with mortgages could be exposing themselves to crippling debts if accident, sickness or unemployment should occur. I understand why consumers are rejecting this cover, as there is no trust that it will pay out, so why shell out in the first place? However, where MPPI has been properly sold, via those who are not motivated by sales targets and reducing their debts in other areas, it can protect mortgage repayments and make the difference between keeping your head above water in this economic crisis and losing your home.”
Only 1% of MPPI is sold direct to consumers and this figure, says Burgess is way too low: “Lenders say they give consumers the option to shop around, but very few have the time or inclination to conduct copious research. It is difficult to compare products on a like for like basis and the majority of providers have their terms, exclusions and limits hidden away in the small print. Consumers need a facility that allows them to compare products and their premiums on a like for like basis, so they have a better understanding of what is available. I blame lenders for these shameful statistics. They have tarnished the reputation of all providers leaving consumers with little faith in the products. What a sorry state to be in, sales are plummeting, complaints to the Ombudsman are soaring and more consumers than ever are left without a financial safety net.”
The Financial Services Authority plan to provide a facility for consumers to make more informed decisions, via PPI comparison tables due for launch in June.”