Lenders should wake up to protection gap: Burgess

In an open letter to mortgage lenders, the director of insurance provider British Money, said the apathy within the mortgage sector over introducing new protection products was “not morally right”.

He said: “Borrowers can be forgiven for their cynicism about mortgage insurance; after all they have witnessed the long running PPI mis-selling debacle, but can the same level of forgiveness be extended to lenders?

“I understand why they are disillusioned and no longer have the appetite to offer these types of policies, but customers taking out a mortgage or remortgaging their properties must be offered a financial support mechanism to cover their payments should they lose their jobs or become unable to work.”

He added that not promoting protection products to consumers was jeopardising the financial well-being of borrowers.

Mr Burgess’ comments followed a warning in October by Duncan Crocker, managing director of Legal & General Network, who revealed a large disparity between the numbers of mortgages arranged by advisers and the number of accompanying protection policies.

Data from the network revealed mortgage applications grew 11 per cent in 2013, while protection applications shrunk 9 per cent.

He said: “Every time a mortgage is advised on, the adviser has a moral duty to explore his client’s protection needs as well.”

Adviser view

James Hammond, owner of Cambridgeshire-based Limetree Financial Services, said: “It’s true that confidence is low regarding protection. A minimum level of protection would be useful and a drive by insurers to dispel some myths regarding what they will pay out on would also improve confidence in protection products.”