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The best policy on MPPI

Advisers might feel tempted to pull out of the MPPI market after criticism of the product but Britishinsurance.com managing director Simon Burgess says they still have a duty to ensure their clients’ repayments are protected.

Anumber of firms have been fined heavily by the FSA in recent weeks for poor practices in relation to mortgage payment protection insurance and the worry is that intermediaries will begin to feel the product is simply too hot to handle.

Given the focus being put on the MPPI market, there is little doubt that advisers are becoming worried of the implications that operating in this market may pose to them and the long-term health of their business.

Critical reports into the market have emerged and none more so than the one issued by the Office of Fair Trading earlier this year. The report came on the back of a super-complaint made by Citizens Advice and has been supported by some findings from the FSA’s own work in this area.

The problem is products are overpriced, poorly sold and badly designed. They do not always offer value for money, are often difficult to compare and not enough information is given up front to clients over the price of the policy or how it will affect the payments they are making in relation to the loan they are taking out.

As criticism of the market mounts, so does consumer awareness of the poor deal they are so often getting. Unfortunately, large-scale providers and distributors in this market have done little to improve the propositions they offer. Why would they when they are making huge profits for little effort?

The real worry for many intermediaries is that MPPI products they have sold in the past will be held up to scrutiny in the face of consumer complaints and the processes they have used in selling the insurance will be found wanting. Did they really search out the best policy in the market? Did it represent the best value or offer the most suitable terms and conditions for the client in question?

Have intermediaries made sure that MPPI is appropriate for their client or do many simply see it as an add-on sale that can earn hefty commission on top of the mortgage?

There are large numbers of advisers doing a fantastic job for clients but there are also too many falling way short of what is required.

Those who feel that backing away from the market and refusing to sell MPPI will avoid future complaints will have to think again. In arranging a mortgage for their clients, advisers not only have a duty to source the most appropriate product but also to ensure clients can meet the obligations of that mortgage in both the good and the bad times ahead.

How clients will manage to meet their monthly mortgage payments in the event of accident, sickness or unemployment must be discussed in full.

If their situation changes, what sort of safety net do they have in place and how long will it support them until they are back on their feet?

The sale of MPPI should not revolve around a simple question of whether mortgage clients want protection but it does not need to entail a full-scale investigation. It must ascertain the personal circumstances of the client and the plans they have in place and this should form part of the client record that intermediaries have.

If, as looks likely, the MPPI market is referred to the Competition Commission, there can be little doubt that large-scale changes will be introduced. This should mean there is better access to a wider range of products and that improved pricing and product design should become prevalent in the market. Intermediaries will have no excuse for not selling the best products available and clients will be more inclined to take on insurance that represents good value and is designed to meet their own needs and not those of insurers and distributors.

In the meantime, brokers should not be looking to pull away from this market because there are likely to be an increasing number of complaints but, rather, they must be looking to differentiate themselves through the service they offer and products they search out. There are good MPPI products available that offer significant savings to clients.

Intermediaries not only have a duty to their client but they also have one to themselves and that can only be served by taking the time to ensure they continue not just to offer MPPI but to offer the best products for their clients and help them protect their interests into the future.

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