Payment protection demand rising

Nigel Payne is managing director of Assurant Intermediary

Datamonitor is a well respected market analysis company which recently published its report on the UK Creditor (Payment Protection) Market and it makes for some very interesting reading for intermediaries.

Yes the market has had a tough time recently in the press and with the regulator but the creditor market in the intermediary mortgage sector has stood up incredibly well.

Datamontior estimates that the market was worth £1.7bn in 2009, which is significantly down on the near £5bn it used to be worth. However dig a little deeper and there are some surprisingly robust areas.

Mortgage customers account for 36% of the total creditor business, £600m in 2009. But split that down further between first charge mortgages and second charge mortgages and we see that first charge mortgages generated £607m of creditor insurance in 2007 and that remained fairly stable at £563m in 2009.

This is at the same time new gross mortgage lending collapsed from £364bn to £144bn. So why has creditor insurance held up so well?

Firstly the level of penetration of Mortgage Payment Protection Insurance on new mortgages reversed its long term decline and increased from 18% to 22% whilst at the same time the percentage sold by intermediaries increased from 25% to 27%. Compare this to your own penetration rates for mortgage payment protection; if you are at less than 22% then clearly you have room for improving your income.

Consumers worried by unemployment and the state of the economy, together with a greater focus on cross sales by intermediaries has all contributed to increasing penetration of MPPI sales.  The reality is that intermediaries are selling more creditor insurance, people are buying more creditor insurance and when there is an up turn in the mortgage market we will see sales in the mortgage payment protection market increase as consumers see the value and the need for more protection products.