MPPI products provided advisers with a simple way to offer clients protection but, following a ruling by the Competition Commission, as of April last year, the way these policies can be sold has changed.
Iain Clark, managing director for protection of LV, warns advisers they are are no longer able to sell accident, sickness or unemployment style insurances products such as MPPI at the point of sale of a mortgage.
Mr Clark says the Competition Commission took this stance because MPPI products tend to have reviewable premiums and pay out for a maximum of 24 months.
As with all types of insurance, Mr Clark points out that when choosing a mortgage payment protection product, it is important that clients purchase the right level of cover for their needs.
Mr Clark says: “The right policy will differ from client to client and will very much depend on variables such as how much they want to insure, how much they are willing to pay and how soon they want their pay outs to start.”
The Council of Mortgage Lenders’ website points out that anyone who is taking out a new mortgage, will probably be offered MPPI by their lender or the intermediary arranging their mortgage.
But unless the MPPI is part of a mortgage “package”, it is up to the client whether they take the MPPI offered with the mortgage or buy it elsewhere.
Also while MPPI was not embroiled in the PPI mis-selling scandal, the FSA has expressed concerns about the pricing of these policies in the past.
Advisers should also be aware that changes were made to the way these policies terms and conditions can be adapted after the FSA expressed concern about increases in premiums, or reductions in cover, on MPPI policies during the recession back in 2009.
The Association of British Insurers (ABI), the British Bankers Association, the Building Societies Association and the Council of Mortgage Lenders set out a framework for dealing with recent and possible future changes to policy terms and conditions affecting some Mortgage Payment Protection Insurance (MPPI) customers.
