Recent ABI research shows that the majority of people who have made a claim under their mortgage pay...
Recent ABI research shows that the majority of people who have made a claim under their mortgage payment protection insurance (MPPI) were 'overwhelmingly satisfied' with both the level of payout and the smooth running of the claims procedure.
Given that it is rare that the public says it is satisfied with anything, insurers should perhaps be feeling pleased with themselves that MPPI appears to be hitting the mark.
However, rather than using these statistics as an excuse for complacency, insurers may do well to read between the lines here as well as looking at the more worrying figures to come out of this and other research on MPPI.
While the efficient claims procedure is to be applauded even though this is something policyholders should be able to take for granted the fact that policyholders were satisfied with the level of cover may have something to do with a lack of awareness of the alternatives. The research showed that "purchases were most likely to be made at the same time as the financing arrangement...There is little shopping around for PPI products." So it is more than likely that the policyholder merely 'ticked the box' at the end of their mortgage application, thereby accepting the cover offered by their lender's selected insurer without second thought.
The research also states that "policyholders had little idea about the specifics of their cover, including waiting periods, pay out periods and even the price" but in the very next paragraph says "most policyholders felt the product offered good value for money."
Well, if people do not know what their policies cover and how much they cost, then insurers cannot possibly take comfort from the fact that the very same perceive MPPI to be good value. And if they have not had any basis for comparison in terms of cover or cost and are not aware of the going rate, then £40 plus per month to cover an average mortgage for 12 months, after a 60-day deferral period, might very well strike them as money well spent.
If they were aware that by shopping around they could, for a fraction of the cost obtain a similar policy, or alternatively a mortgage income protection policy, which could potentially cover them for the rest of their working lives, then the chances are they would change their views on what constitutes good value.
Furthermore, research carried out on behalf of MPPI provider, Securityfirst, showed that MPPI has little impact on mortgage arrears, with a significant number of lenders (47%) saying they would press on with possession action even where the borrower had MPPI. This further highlights the shortcomings of the policy if not in terms of the cover levels provided, in terms of the length of payout period.
Interpreting responses from a public that is still woefully unaware of what the State will provide (fewer than a quarter of respondents in the ABI's case), and equally ignorant as to what private covers are available, is always going to be problematic. What is clear is that a significant number of existing MPPI holders could benefit from the impartial advice of an IFA who can ensure their cover is as appropriate and comprehensive as possible, not to mention the 1.7 million mortgage holders who have no form of mortgage payment protection in place.
Catherine Tennant
Editor-in-chief
