Banks
and building societies mis-selling and over-pricing Mortgage Payment Protection
Insurance (MPPI) are responsible for a downturn in sales, says Simon Burgess
from independent provider British Insurance.
Recent
Association of British Insurers’ figures* reveal a steady decline in buyers of
MPPI cover – 18% took out policies in 2007, compared to 25% in 2005 and 34% in
2000. Those who continue making
longer-term payments is also spiralling – 18% in 2007, 21% in 2005 and 22% in
2001.
Burgess
comments: “I’m 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 – there’s 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, PPI 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’s 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 which allows them to compare products and their premiums on a
like for like basis, so they have a better understanding of what’s
available. Once this is in place, there
will undoubtedly be more direct sales as lenders find it harder to compete.”
The
Financial Services Authority announced it would provide a facility for consumers
to make more informed decisions, via PPI comparison tables due for launch in
May. This has now been put back until
the end of June. Burgess comments:
“Consumers need access to FSA web
information now, before even more turn their back on this
cover.”
He concludes: “I blame lenders for these shameful statistics -they’ve 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.”
* ABI Mortgage Payment Protection
Insurance Statistics April 2008