The mortgage protection market does attract a certain amount of criticism in the press and other media. Compared to the number of polices sold, this is not significant, but needs to be redressed.
The main criticisms are,
- Mortgage insurance customers do not always realise they are purchasing the mortgage protection policy.
- It is sold to customers for whom it is unsuitable.
- The policy details are not explained properly.
Mortgage insurance customers do not always realise they are purchasing the mortgage protection policy
This can be because the price of the insurance is automatically included in the mortgage quotation, either without explanation to the customer or before any explanation if offered.
Telephone surveys have sometimes over exaggerated this area, but unfortunately it can occur.
It is sold to customers for whom it is unsuitable
This is a natural follow-on from ‘ bunding’ the mortgage insurance into the loan quote. If little or nothing is said about the insurance and it is not individually discussed, then there is little check regarding suitability.
The products are reasonably wide and some of these comments may be due to a lack of understanding over the which of the cover, or centre on a few specific clauses.
The mortgage insurance policy is not explained properly
This is a staff training issue for those who sell the actual insurance. These staff need to understand fully the benefits and shortfalls of the cover provided.
Mortgage protection insurance is an ‘add on’ sale in many cases, and it is tempting to give more attention to the primary product. This could result in the customer having less awareness of what the cover is about.
What ever is said improvement is always welcomed.
Application of the FSA Insurance Conduct of Business rules to mortgage payment protection insurance
This sections looks at how the FSA Insurance Conduct of Business (ICOB) applies to mortgage protection insurance.
Where ‘Firm’ is referred to, that refers to the authorised company distributing (selling) the mortgage protection insurance. That firm may be the lender, the mortgage broker or an appointed representative.
The relevant sections of the ICOB are,
- ICOB 4 Advising and selling standards,
- OCOB 5 Product disclosure,
- ICOB 6 Cancellation,
- ICOB 7 Claims handling.
ICOB 3 an also apply as it deals with Financial Promotion rules which relate to adverting and mailing campaigns which are not within the scope of this article.
This section is broken down into the following parts,
- Disclosure of information to the customer.
- Product suitability and understanding the customers’ needs, advice and information.
- Regulations regarding the claims process,
- Complaints process and the Financial Ombudsman service,
- Compensation.