Letter to the Editor: OFT wrong over MPPI

Nia Williams

February 18, 2009

He goes on:”It is a dangerous practice in any walk of life to base judgment purely on statistics. As a statistical analyst with over 40 years experience in the mortgage and Accident, Sickness or Unemployment (ASU / MPPI) market it is my belief that the OFT report serves only as scaremongering.

I have worked with the heads of dept of many at the OFT and I’m disappointed that they have put their signature to such a report. To make an informed decision you must get a balanced view based upon historical events as well as current events. The balanced view is that ASU should not be a bolt on to a mortgage it should be sold to every (there are some always exceptions to every rule) client taking out a mortgage.

In the past I have condemned Single Premium Accident, Sickness & Unemployment (SPASU) as it has always been mis-sold, over priced and inflexible. However I agree with Justine Tomlinson of Mortgage Next that there is a need for a SPASU with the proviso that it is priced fairly. SPASU should cost less/£100 benefit than monthly payments as the underwriter is getting the full premium paid up front plus a guaranteed term of payment. However, I digress as the main point I would like to make is that for too long brokers have done their clients a mis-service by failing to sell ASU.

The reason, the monthly commission was not worth the paperwork required to satisfy the regulators. The brokers have been missing two vital points – 1. They should not undersell the client leaving them exposed to an Accident, Sickness or Unemployment and 2. The commission can and has done for many brokers acted as a residual income which can be greater than a state pension scheme.

The OFT has done harm to an industry that needs promoting by Watchdogs and regulators alike. I would go as far to suggest that the FSA has not done due diligence on those brokers who have failed to write ASU business for their clients. Also, the FSA has failed the entire industry by not overseeing the financial crisis within the banking sector so ASU must come a considerable way down their list of priorities.

Just as the FSA fine brokers (quite rightly) for selling only SPASU they should fine brokers that fail to sell ASU as they are failing their clients and the industry. It is in nobody’s interest for clients to lose their home through repossession as it reduces the market size. That said, are we so blind to see that ASU protects a persons greatest asset, their ability to earn an income.

I may be retired now but I am still alive and hopefully this letter if published should serve as a wake up call to the OFT, FSA and brokers to get their facts right and their act together. Consumers need ASU (MPPI) and they have a right to have an independent, informed and balanced view before they make an informed judgment. All those involved in the mortgage/ASU process have a duty and responsibility of care to the client. If that is secured it will be a win-win situation for everyone.”

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