FSA orders GBP 60 Million Mortgage Protection Insurance Repayments
More than a million UK householders are to get refunds on their recent mortgage protection insurance monthly payments, after the City watchdog, the FSA, forced PPI providers including giant firms such as Aviva and Abbey; to pay back over GBP60 million in increased Mortgage Protection Insurance premiums, which were slapped on already cash strapped mortgage borrowers earlier this year. Over 2.1 million UK consumers have policies to repay mortgages and loans with accident, sickness and unemployment insurance attached.
The major UK money lenders have had over 10 years of collecting premiums on inflated house prices, with very few claims. But with claims now rising due to the recession, they've been recently hiking up the rates on many of these policies to maintain their profit levels.
The Financial Services Authority (FSA) and Mortgage Payment Protection Insurance (MPPI) firms have agreed an industry-wide package of measures for consumers, including refunds of around £60 million.
The industry has acted in response to FSA concerns over recent increases in premiums and reductions in what customers are covered for under their policy. The FSA’s concerns centred on the terms permitting these changes, and how clearly they were disclosed. The FSA expects its concerns to be addressed by the agreement reached. Following discussions initiated by the FSA with relevant trade bodies and some firms, the industry has responded positively by agreeing to:
• proactively refund increases in premiums, and reverse any reductions in cover, for customers who have experienced these changes to their policy in 2009; • offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009; • freeze premiums and cover for existing customers for at least the remainder of this year • amend Mortgage Protection Insurance contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.
New contracts will mean customers get a fairer deal with two months' notice of any changes to enable people to compare mortgage protection insurance products and switch mortgage protection if necessary.
Jon Pain, managing director of supervision at the FSA, said:
"The FSA welcomes this positive move by Mortgage Protection Insurance firms to reverse recent changes in premiums or cover which will put affected customers back in the position they were in before the policy was changed. It will also give all MPPI customers clarity about when and why firms will be able to vary these in future. "This clarity will provide the basis for MPPI to remain a valuable option for many mortgage customers who wish to take out protection, alongside the mortgage commitment they are taking on." The affected companies will contact customers if their policy is affected, and will make all refunds by the end of June 2010.
The Consumer Panel has also welcomed the announcement today of FSA action and an industry-wide refund on Mortgage Protection Insurance. Adam Phillips, Chairman of the Financial Services Consumer Panel, said: “This is exactly what a financial regulator should be here for and we applaud the FSA’s action. It cannot be right that firms change the terms and conditions of an insurance policy just as times get hard and when people are more likely to try to claim on it. We note that this agreement is to freeze premiums and cover for existing customers until at least January 2010. We will be watching to see how the FSA ensures Mortgage Protection customers continue to get a fair deal beyond this date. Significant changes to cover go against the whole principle of why people pay for insurance and undermine consumers’ trust in the industry.”
Burgesses Insurance News has published an interesting article today looking at the rationale behind the purchasing of insurance as a protection vehicle, and questions why the public are disinterested and can't be bothered when it comes to purchasing Mortgage Protection for the largest investment of all - a house!...........
It it just that the public doesn't appreciate the risks? Until it is too late....
Mortgage insurance – why be vulnerable?
First Published Burgesses.com July 27th, 2009 in Mortgage Insurance |
Most people are thoroughly accustomed to one of the most basic principles of insurance – if something is valuable, it is probably worth insuring. Although the principle might be widely recognised in many other areas of domestic life, however, for some reason it does not seem to be so readily grasped when it comes to mortgage insurance.
Only an estimated 25% of the nation’s 11.7 million mortgage borrowers are believed to have arranged this potentially indispensable for of insurance. Given the sheer value of the mortgaged homes, not to mention the dire consequences of defaulting on the mortgage repayments, the statistic is surprising to say the least. Some three-quarters of borrowers seem to be leaving themselves vulnerable to the most common risks to their incomes – accidents, illnesses and unemployment – and with the loss of an income, the ability to continue their mortgage repayments.
The penalties for defaulting on the mortgage repayments, of course, can be serious indeed. In the worst cases, it can lead to repossession of the home itself by a mortgage lender determined to recover the outstanding debt. But even if some arrangement can be reached with the lender, the homeowner is still vulnerable. If mortgage repayments cannot be made, the home might have to be sold – even though the current state of the housing market might mean that such a sale realises less than the outstanding mortgage debt. At the very least, the late or non-payment of the mortgage instalments as they fall due will attract adverse credit reports on the borrower’s file. This will make borrowing – or any other form of credit – more expensive to arrange in the future, if the facility is extended to the individual at all.
This is a vulnerability that the homeowner can easily avoid with mortgage insurance. The insurance can offer complete protection for the mortgage repayments in the event that the policy holder meets with an accident or suffers an illness that prevents normal earnings from work. The same protection is also extended if the policy holder loses his or her job through compulsory redundancy. In any of these events, such a policy will pay out an insured benefit from which the mortgage repayments can continue to be paid – in many instances, directly to the mortgage lender concerned, if needs be.
Once in payment, the mortgage insurance monthly benefit payments ensure that the mortgage is repaid every month that the policy holder remains incapacitated for work, involuntarily unemployed, or for up to a typical maximum period of 12 months, whichever is the shorter time. Taking up the option offered by some policies, payouts can be made over an even longer period and extended for up to a maximum of 24 months, if an additional premium is paid.
Understanding Payment Protection Insurance Cover in the UK
On Monday, Building Societies and Banks will no longer be allowed to sell payment protection insurance at the point of sale. They will also be banned from selling lump sum upfront single premium policies. This article explains the principles of PPI and how best to purchase it given the recent legislation and changes in the UK economy.
If you have ever bought a new car or a large flat screen television the chances are you paid for it with some type of finance plan, credit card or credit facility, or loan. Apart from being offered a breakdown warranty, in the past you may well have been offered an insurance plan to cover the repayments of the credit should something terrible befall you. This is the basis of payment protection insurance or PPI as it is commonly known.
What does PPI cover? Payment protection is widely available these days to cover all forms of credit or borrowing. Loan protection products are sold that either individually or collectively cover credit cards, bank loans, car finance and all other monthly payments and outgoings. Until recently you may well have been offered this type of cover when you took out the loan or credit card; however this was made illegal in 2009 after a long enquiry by the Competition Committee looking into the restrictive practices of the major high street banks and lenders. Consequently payment insurance premiums and plans have become a lot cheaper now that independent suppliers have entered the market. If you own a house under a mortgage you can purchase what is known as Mortgage Payment Protection Insurance or MPPI. This type of plan though often cheaper, will only cover the monthly mortgage payments. Other protection insurance products are available, the most common being those that cover your salary or income often known as Income Payment Protection Insurance or lifestyle cover. With these types of products you are not limited to agreed repayments and can spend the income benefits as you would your salary or wages.
What does PPI cover you against? All payment protection products cover you against and will pay a monthly sum to protect your payments, in the event of you suffering from one or a combination of accident, sickness or unemployment. It is possible to buy these as standalone covers, although accident cover is more often than not sold alongside sickness cover. Unemployment Insurance cover, which protects you against sudden redundancy or unemployment is often sold by itself but because of the nature of the risk, commands a much higher premium.
How long does protection insurance cover you for? The length of time of the cover is dependent upon how long someone wants the benefits to be payable for in the event of a claim. This varies by insurance company and is often only for twelve months although some of the better more flexible providers offer cover for up to 24 months, at a premium. It should be noted that this type of insurance is viewed by the providing companies as an invaluable short term solution to life's difficulties and not the correct type of cover for long term illness or disability, for example.
Purchasing payment protection cover With so many offerings in the market it is a worthwhile exercise to shop around for cover. Most independent suppliers have online applications that literally only take a few seconds to complete. You normally have to supply you age, and how much benefit you would like each month. When buying you will need to decide how long you wish to wait after you become sick or unemployed, before you start to receive the monthly benefits. This is known as an excess period and you will normally be offered periods of 30, 60 or even 90 days. Obviously the longer you wait the cheaper the monthly premiums will be! Look out for companies offering back to day one cover which will pay you back to day one of your claim once the excess period has passed. When comparing payment protection insurance plans it is necessary to find one that will cover all of your monthly outgoings. Many providers have different limits and it is important that you find one that will not leave you with a shortfall for repayments! As with purchasing all types of insurance, but particularly with payment protection cover, it is very important that you check that you are you eligible for cover and not excluded under the policy conditions, which are often more rigorous than for other types of cover.
When comparing payment protection plans for Mortgage Payment Protection Insurance and Income Protection Insurance it is sensible to visit a large respectable, independent supplier such as PPI Insurer of the Year Burgesses.com for advice and quotes. Burgesses offer a vast array of information and online quotes backed up by a useful helpline of experts.
Those self serving suits from around Threadneedle Street who we saw exposed in Channel 4's excellent documentary on non-executive banking directors, have been racking their brains recently on how to get the first time buyer market moving.
Laughing into their cafe crappe they must be rubbing their hands in glee that the public furore has shifted onto their erstwhile employers - the MP's of Westminster or as Sky TV would have us call it 'The Rotten Government'
So on the back of the Speaker Bashing, the Government in the guise of Lloyds TSB has today launched a new first time buyer mortgage product called- ‘Lend a Hand’ (who thought of that?) - offering 95% loan to value (LTV)
‘Lend a Hand’ or 'Cop for Your Kids' as it is soon to be known, which is obviously aimed at the middle classes with kids still at home, offers first time buyers a 95% loan to value (LTV) mortgage by taking a legal charge on a savings account belonging to their parents, grandparents, rich friends or anyone else willing to cough up the dough to get the kids a place to live.
The new product is a fixed rate mortgage at 4.39% for 3 years, and is nearly £100 a month less than the industry average 90% mortgage rate at 5.98%. Hmm - isn't the base rate currently 0.5%?
Lloyds are still looking for a 25% deposit but they are allowing this to be made up through a combination of a minimum 5% deposit by the first time buyers and the remainder from the parents or backers savings account.
For example,on a £100,000 property, a 95% LTV mortgage of £95,000 is provided by Lloyds TSB at a three-year fixed rate of 4.39% with a £995 fee. £5,000 is provided by the first-time buyer as a deposit for the property, £20,000 is provided by parents, grandparents or friends and held in the Lloyds TSB ‘Lend a Hand’ savings account earning a fixed rate of 3.5% for 42 months.
Why couldn't they offer the rate Tax-free like an ISA if they really want to encourage people to get involved ?
So what are the multiples of salary limits and can the first time buyer really afford the mortgage repayments?
Furthermore Insurance Blogger is amazed that the Government thinks that there are lots of people have got £20 grand to spare during the current credit crisis and recession, plus a possible further five thousand on top if they really want their kids out the house?
At least Lloyds TSB isn't allowed to sell mortgage payment protection insurance at the point of mortgage sale any more! Granny's pension wouldn't stretch to that!
What a bunch of Bankers! UK Banks challenge PPI ruling
Feelings are running high this morning in the Payment Protection Market and the consumer pressure groups with news that Barclays and Lloyds TSB are challenging the Competition Commission's ruling to ban the sale of Payment Protection Insurance at the time of sale of a loan mortgage or credit.
Insurance Blogger thinks this is outrageous after years of expenditure on the investigations by the FSA and Competition Commission and others, and the subsequent fines for misselling, that any institution, let alone a largely Government owned institution Lloyds Bank, should have the right to challenge any such decision!
Payment protection insurance lobbyist Sara-Ann Burgess from specialist payment protection insurance company, Burgesses confirms our viewpoint. She said "These institutions are without morals and intent on putting profit ahead of consumers' interests." "This latest move is a bid by the banks to continue making billions of pounds in profits in order to prop up other failing business areas. "We all know PPI mis-selling is rife amongst High Street lenders and their resultant profits are obscene. These delaying tactics, lodged to stop the ban going ahead in October 2010, only serve to prove just how shameless these firms are and the extent they will go to protect their 'cash cows'."
The UK Protection Insurance sector takes over £5 billion in premiums every year and around 90% of the premiums goes in profit to Banks and Building Societies.
In 2006, the Competition Commission reported the 12 largest distributors made profits of GBP1.4bn - before the recession kicked in and demand for unemployment insurance protection and income protection insurance policies grew.
After a lengthy investigation into anti-competitive practices, the Commission announced in January a series of measures to lower prices and widen choice in the PPI sector.
These included: axing single premium PPI and replacing with monthly payments. a seven day ban on selling cover alongside credit. a requirement to offer PPI separately to credit.
The Financial Ombudsman Service predicted some 30,000 payment protection insurance mis-selling complaints would be received by the end of March this year and confirmed the majority of them can be traced back to High Street lenders.
It upholds at least 90% of cases and in the case of one lender, 100%.
Sara-Ann Burgess concludes: "How can you on the one hand say banks are working to restore confidence and then on the other have two major players challenging decisions in order to maintain gigantic market shares and prevent freedom of choice? Actions are certainly speaking louder than words. These lenders are damaging the financial well-being of consumers and will continue to do so. What's equally insulting is the fact that Lloyds is paid for by taxpayers and our money is being used to ensure we continue to be ripped off."
Insurance Blogger couldn't agree more! The banks created the current recession by the misselling of mortgages and piggybacked missold mortgage payment protection insurance, and now they are trying to retain their ill gotten share of a market that wouldn't exist if they had done their job properly in the first place.
BancAssurance is a French joke - Keep your noses out of Insurance - Bankers!
For those of you still in a job, we wholeheartedly recommend Burgesses Unemployment Insurance
It's nearly a week since the law was changed to stop the sale of piggy back protection products on top of loans and mortgages. Anyone taking out a new loan or mortgage (is there anyone out there?) now has fourteen days before the lending company is allowed to contact them to sell PPI products.
This cooling off period was introduced a after Competition Commission report recommendation, to stop the misselling of protection products to desperate customers who would often accept these one off payment charges as they didn't want to jeopardise the borrowing.
So with less than a week to go before phones start ringing in all those lucky houses who have managed to secure borrowing, InsuranceBlogger advises anyone to call bar those numbers and shop around on the Internet for much better deals on loan payment protection insurance and mortgage payment protection insurance.
There are many independent companies out there offering better protection cover for far cheaper premiums. They will also offer you products that will be more suitable to the risks of accident unemployment and sickness (ASU) which can cover your whole lifestyle rather than just a small portion of it should the worst happen. One Such company is Personal Accident who offer a range of independent quality PPI and lifestyle insurance products.
Mortgage Payment Protection Insurance for Unemployment
Last December saw UK average house prices fall by another 2.5% taking the average house price down to £153,048 which amounts to £29,000 less than 1 year ago. However the number of new mortgages offered and approved in November was at it lowest since at least 1997, according to recent statistics from the British Banking Association (BBA).
The banks and building societies have taken a hit on the interest rate income and continuing to stifle liquidity and extenuate the crisis that they created. Despite Government measures the crisis appears to be deepening as the supply of money shrinks.
With unemployment growing daily and the outlook for the first half of the year bleak, it really is time you took a look at mortgage payment protection insurance.
This cover is specifically designed to meet your mortgage outgoings should you become unemployed. Award winning British Insurance offer various payment protection policies with mortgages covered up to £2000 per month. A typical premium will be in the £30 - £40 per month range - excellent value for peace of mind in these times when noones job is secure.
Mortgage Protection Insurance or get a gang of cats
Love this offering from one of British Insurance ad agencies for their latest award winning mortgage payment protection insurance. Funny film noir - Ealing style
British Insurance Ltd the UK's largest mortgage payment protection insurance independent company, have once again cleaned up on most of this years awards for the best MPPI products.
Here's the latest offering from them advertising the award winning mortgage payment protection insurance.
For Great MPPI Think British! - They told me to say that but its quite catchy!
Government to help halt non Mortgage Payment Repossessions
The Government has announced a new scheme to help people who suffer a temporary loss of income stay in their home. The scheme will apply to mortgage holders who have mortgages up to £400,000. The ten biggest mortgage lenders have nodded approval to the scheme but they're all saying 'we need more details'. The devil may well be in the detail!
The new Homeowner Mortgage Support Scheme will enable households that experience a significant and temporary loss of income as a result of the economic downturn to defer a proportion of the interest payments on their mortgage for up to two years. The Government will guarantee the deferred interests payments in return for banks' pariticipation in the scheme.
The Government will work with lenders over the coming days to develop the scheme in detail, with a view to it being available to customers early in the New Year. The country's eight largest banks have already pledged that they will work with the Government to develop the scheme.
The Chancellor said:
"This is real help for homeowners at risk of repossession through no fault of their own. The scheme will give people who face a temporary fall in their income the confidence that they need to rearrange their finances so they can come through a difficult period without losing their home."
Housing Minister Margaret Beckett said:
"We are determined to do everything possible to ensure that hard working households have the option to stay in their homes, if they suffer a loss of income during the downturn. This scheme will give households the breathing space to get back on their feet again and help ensure they do not face or fear repossession.
It shares the risk of home ownership at this difficult time across all the partners - the Government, the lenders and the borrowers. We want to see all lenders signing up to this scheme as part of their efforts to ensure that repossession is always an absolute last resort."
Our opinion at Insurance Blog is that if the Government introduced their own captive mortgage payment protection insurance scheme utilising the skills of or plagarising the model of a large independent supplier such as British Insurance Ltd, and incorporated it into the National Insurance system then they wouldn't be in the situation they now find themselves - having to underwrite mortgage payments after the event at the taxpayers expense.
Similarly it is a National Security issue if we were to see large scale repossessions of homes and we welcome these proposals as a line of economic defence.
Moreover we're looking forward to further interest cuts today!!
Mortgage Payment Protection Insurance? For Quality Think British
Simon Burgess the CEO of BritishInsurance.com the UK's largest and most popular independent mortgage payment protection insurance company offers some frank and sound advice on purchasing mortgage payment protection insurance.
BritishInsurance.com has won multiple awards from trade press and consumer groups for its MPPI products, over the last three years.
We often get told 'we've got mortgage indemnity' or 'we don't need mortgage payment protection as we've got mortgage indemnity'. So we thought we had better put the record straight on the differences between the two.
If you are paying mortgage indemnity insurance (which you shouldn't be) you are paying for a lender to be protected should you fall foul of the credit agreement and not pay the loan or mortgage.
Mortgage indemnity is insurance that your lender may ask you to take out for its protection in case, at some future stage, you fall significantly behind with your mortgage payments and your lender has to repossess your property and sell it. If the property is sold for less than the amount of your outstanding mortgage, your lender can claim on the mortgage indemnity to recover some (or all) of its loss.
You should be aware that mortgage indemnity does not cover you. You must repay all the money owed under your mortgage, whether or not your lender makes an indemnity claim.
Mortgage payment protection insurance or MPPI protects your mortgage payments should you lose your job or get sick. Most mortgages can be covered for under £20 per month if you go to an independent supplier such as Personal Accident or British Insurance. MPPI, or mortgage payment protection insurance, is private insurance that borrowers may take out to insure against sudden loss of income due to unemployment or health-related difficulties. This type of insurance is also known as Accident, Sickness and Unemployment insurance or ‘ASU’.
It is a good idea to take out MPPI, or some other form of income protection insurance, because state benefits do not normally cover mortgage interest during the first nine months you are out of work. The above independent suppliers will offer insurance cover that is suitable for you and your circumstances - and can cover you if you are self-employed, on a fixed term contract, or have a pre-existing medical condition.
It might not be to everybody's taste but viral marketing has been one of the major success stories on the Internet. Insurance companies with their massive marketing budgets have been slow to catch on and rely on multi-million pound campaigns featuring nodding dogs and flying pigs to get their brand across. Hurrah for youtube.com and step forward mortgage protection company Personal Accident for grabbing the initiative with the following silly - but very watchable, if not PC ad for hazardous sports accident insurance.
Whether you think its crap or not, it demonstrates the viral capabilities of video, accessible to everyone from their mobile phones and more importantly, while all the big budget insurance players are wasting their money on TV ads and trying to get to the top of search engines, they've missed the point that more people visit myspace.com and youtube.com than visit Google these days.
Social marketing is becoming more important daily and those pioneers will grab a large share of the personal recommendation market.
The official figures for the number of repossessions for the period of April to June this year have just been released and show that the number of houses being taken back by the banks and building societies through the courts, has risen a massive 71% than a year earlier.
With 11,054 new cases in Q2, the Council of Mortgage Lenders are predicting even higher repossessions for the period just finished and a spokesman estimates that by Christmas 2008 170,000 homes will be under threat from repossession, being 3 months or more behind with their mortgage repayments.
With the economy only just on the start of the road to recession, the picture for the new year looks gloomier daily.
If you believe that your job may be under threat in the not too distant future, mortgage payment protection insurance is the sensible option to keep the baillifs and wolves from your door. You should be aware that these policies will not pay out if you are made unemployed during the first month of the policy - so act now!
UK Finance Giants withdraw Unemployment Mortgage Protection Insurance for own employees
Insurers may withdraw Mortgage Protection Insurance cover to their own employees
In the wake of the credit crunch, collapse of Lehman Bros. , the inevitable threat hanging over the future of Amercian insurance giant AIG, and the unprecedented collapse of UK Insurance giant HBOS shares by 40% in one day, you could argue that MPPI unemployment Insurers are right to worry and already some capital lenders are refusing to offer payment protection insurance to homeowners and employees who work for banks and building societies. Some Underwriters have gone further becoming more risk averse and have included all financial services sector workers including insurance company employees, IFAS and insurance broker staff. This adds to the growing list of trades and professions who are now finding it increasingly difficult to puchase unemployment insurance to protect their mortgages, income level or loans.
Construction workers, estate agents, conveyancing solicitors and services and more recently removal firm staff can no longer easily purchase mortgage payment protection insurance or the other products that could ease the pain of being unemployed.
The move could be indicative that the UK Insurance market is heading for recession. Insurance Staff have been made unemployed gradually over the the last six months, with a recent 6000 redundancies at Norwich Union flying under the general radar, with other insurance company giants creating redundancy hitlists.
A spokesperson for Personal Accident - one of the UK's largest online independent mortgage protection insurance providers, who compare policies on price and cover - said, "It's true that we have received notices from some of our underwriters withdrawing certain particular income related unemployment cover for a list of trades within the financial services sector. However we can still offer age-related policies for income protection insurance and mortgage protection insurance to all bank and building society staff, which generally offer better cover at lower prices as they are not lifestyle rated and available to anyone. As these are monthly policies they are simple to change midstream - you could save yourself a fortune in premiums if you switch your policy from a bank or building society and a lot of worry if you are unfortunate and join the ranks of the mass unemployed, or your building society or bank collapses leaving your policy worthless. Could you meet your mortgage repayments or pay bills without a job? These are very worrying times...."
Simon Burgess head of independent provider Burgesses agreed. "Age-related unemploment insurance offers the best solution to financial services workers who may be threatened with unemployment. We offer policies to cover your mortgage, wages or debts whilst you are unemployed. I would however advise anyone thinking of protecting themselves from financial harm if they lose their job, to act fast as there is a ninety day exclusion no claims period from the start of the policy." He added, "Although our mortgage protection insurance has seen a downturn with the number of new mortgages being taken out virtually non-existant due to the credit crunch, we have recently seen a sharp rise in the number of unemployment insurance applications, particularly from workers in financial services."
So it appears that if you want to be able to pay your mortgage in three months time or still have an income you should take out payment protection insurance cover today. This is particularly prudent for financial services sector workers whose jobs appear to be most at risk.
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