MPPI price has fallen, says new survey

The cost of mortgage payment protection insurance (MPPI) is falling, according to a survey conducted by COVER, writes Ben Marquand.

One of the main criticisms of MPPI in the past has been that it is relatively expensive for the limited cover it provides. But following the joint initiative from the Association of British Insurers (ABI) and the Council of Mortgage Lenders (CML) in 1999 to boost standards, there have been improvements in both the clarity and the cost of products.

Even though the cost of cover still varies considerably between providers, nearly all the premiums have come down in price over the last 12 months.

The survey found that the cheapest premium for accident, sickness and unemployment cover with a 30-day deferment period is now £3.60 per £100 of cover, whereas last year the cheapest was £3.95. With a 60-day deferment period prices have dropped even further with cover available from £2.93 compared with £3.75 last year.

According to a number of providers, the increasing number of policies sold has put a downward pressure on premiums.

Ted Yorke, managing partner at Berkeley Alexander, said: 'There are a number of key reasons for the cuts in premium rates. First, the baseline standards brought in mean it is easier to measure products against each other, so they need to be good. Second, all the providers involved make the market competitive, and finally the low unemployment figures in the UK mean underwriters are not feeling the pinch and can charge lower premiums.'

However, Bruce Bulgin, partner at IFA group Chadney Bulgin, said premiums may not come down much further in the future.

He said: 'There cannot be a lot of space to come down much further, providers must be quite close to the bone now. And, because the Government only expects a limited number of people to take out cover, and because it is only one of a range of mortgage protection products to be discussed, there may not many more cuts.'