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Lenders ending free ASU and MPPI as regulation costs bite

Mortgage lenders are withdrawing free ASU and MPPI protection in response to the mounting costs of general insurance regulation.

Nationwide and Nottingham Building Society have ended their free accident sickness and unemployment cover and it is believed that other lenders are set to follow.

Abbey National’s free three-month ASU promotion is also coming to a close.

Charcol senior technical adviser Ray Boulger says len-ders will no longer be able to offer free ASU or mortgage payment protection insurance promotions because of the cost of regulation.

ASU and MPPI both come under the regulatory regime which came into force on January 14.

The changes mean that any broker who effectively “ticks a box” at the end of a mortgage application stating that the client wants ASU must be regulated under the FSA’s general insurance rules.

Halifax intermediary manager Chris Pearson says that all brokers will be checked whether they are authorised if they introduce clients to protection such as ASU as int-roducers are regulated under GI rules.

Boulger says ASU is often a mortgage customer’s first introduction to protection and if free ASU is removed for hundreds of customers, the danger is that many mort-gages may be left unprotected.

Nationwide, Nottingham and Abbey all say free offers will no longer be available but deny that this has anything to do with general insurance regulation.

Boulger says: “This has come about specifically bec-ause of regulation. Lenders have spent a lot of time and effort giving it away for free. The new regulatory environment has changed the dynamics of the cost.”

London & Country mortgage adviser David Hollingworth says: “The timing of all these withdrawals after GI regulation is a little suspect but if you have to be more specific now about what the product is there for, it must be good for the customer.”

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