PPI debate overshadowing protection needs

Ramesh Sharma

March 18, 2006

The current debate over PPI has been blamed for the slow up-take of insurance policies and intermediaries unwillingness to sell the product. It is believed that only a quarter of new mortgages have any type of cover.

According to Kathy Chapman, managing director at Commitments Protection, it is the client’s interests that should be at the forefront of the debate and the fact they need some form of cover.

“The present concern misses the main point which is the low take-up of mortgage payment protection insurance (MPPI). As an industry, we need to consider that as long as the majority of new borrowers do not purchase a payment protection policy, we could be said to be failing in our duty of care to them. This is the issue that is crying out to be addressed.”

Commitments Protection pointed to its own research, which found 76 per cent of home-owners believed the government will cover them if they miss a mortgage payment through unemployment or illness. It also found 17 per cent of consumers would have brought some type of insurance if it were offered to them by their mortgage intermediary.

For Jock Cassidy, managing director of Ashley Law, a great deal of the problem lies with brokers giving PPI a wide berth in the mortgage sourcing process.

He said: “PPI is a credible product but it does not produce a very large amount of commission, so intermediaries are not going to spend much time promoting it to their clients, unless they are working on a fee basis. Bundling all types of insurance cover together, as has been talked about recently, is a good idea in theory, but once you take away the commission incentives, intermediaries are not going to promote it.”

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