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MPPI firms agree to refund £60m

The FSA and providers of mortgage payment protection insurance have agreed a package of measures for consumers, including refunds of around £60m.

The announcement comes after the FSA raised concerns over increases in premiums and reductions in what customers are covered for under their policy.

The regulator’s concerns focused on the terms permitting these changes and how clearly they were disclosed. It says it expects these concerns to be addressed by the today’s agreement.

Under the deal, MPPI firms have agreed to proactively refund increases in premiums and reverse any reductions in cover for customers who have experienced these changes to their policy in 2009.

Providers will 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 and freeze premiums and cover for existing customers for at least the remainder of the year.

They have also agreed to amend MPPI contracts to ensure all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.

FSA managing director of supervision Jon Pain says: “The FSA welcomes this positive move by MPPI 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.”

Firms will contact customers if their policy is affected and will make all refunds by the end of June 2010.

The Financial Services Consumer Panel welcomed the announcement.

Chairman Adam Phillips says: “This is exactly what a financial regulator should be here for and we applaud the FSA’s action.

“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 MPPI customers continue to get a fair deal beyond this date.”

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Comments

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  1. Retrospective Regulation
    Now I am not a great one for MPPI. I’ve always thought it a pretty awful prduct and where possible we’ve always tried to look at IPP/PHI for clients as a preference as the contacts are for a set term and usually the only variable on a reviewable rate is for underwriting/claims history issues.
    For the FSA to do this, it is retrospective regulation. If the costings are now higher for a contract which IS annually renewable due to changed market conditions (in aprt due to the failure of the F-pack) to regulate UK banks properly, why should the insurer be the one who is paying.
    Does ANYONE no where they stand with something they are doing today in 10 years time with the F-pack and I think you’d have to say whatever you do, there is a high liklehood of if something goes wrong, the F-pack will say pay up, which is fine if you are playing a numbers game, but not if you have a small client base.
    When is a contract which was fine as far as “Unfair Contract Terms” an unfair contract? When the FSA decide it is is the simple answer. We’ve tried to get teh FSA to comment on our new contract terms, but they will not, they simply tell you to take legal advice which is not worth the paper it is written on if we have retrospective rules and they will not give any opinion or say yes or no before we go ahead so THEY can avoid any responsibility for saying what one does is OK!

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