TOP FIVE CONSUMER WATCH OUTS TO STOP MPPI COWBOYS
Today, CUNA Mutual reported an increased uptake in Mortgage Payment Protection Insurance through its distribution partners. They added that both providers and insurers needed to work harder to provide customers with valued protection during these tough economic times.
To help consumers get the best deal the 75 year old Mutual provide the following five top tips to help consumers choose well and avoid inappropriate MPPI selling.
- One size fits all cover should be approached with caution. You will undoubtedly be paying to cover the costs of a headline grabbing policy and the campaign behind it.
- Ensure when you buy, the sales process asks and answers questions relevant to your situation.
- Beware upfront lump sum payments for policies – your needs may change and these policies leave you exposed as you have paid upfront.
- Instead choose a monthly, flexible, portable product that allows you to change mortgage provider without a period of re-qualifying for cover - Within this make sure your policy offers an appropriate and affordable excess.
- Investigate any long exclusion periods for existing medical conditions
- The industry standard time limit before you can claim is 12 months before and 12 after registering the condition, any more exclusion and you risk being penalised unnecessarily, better products exist!
- Avoid requests for unreasonable evidence of medical status or exceptions for cover for back conditions and mental illness. These are classic ways to confuse people to overstate their health status on forms. Minor and irrelevant afflictions are sometimes used to invalidate claims.
- To avoid this, pick a policy where insurer’s rights to change rates, terminate cover or amend terms and conditions are clearly stated and upfront.
- Long re-qualification periods are crucial to avoid. Why should you not be able to claim on insurance, because you have claimed on it once already? - You pay a premium to be covered in all eventualities, not just a one off mishap, so ensure you are covered at all times.
Since entering into the Building Society market less than two years ago CUNA Mutual new distribution partners have seen MPPI sales dramatically increase, with some partners reporting increased penetration and better customer support of mortgage sales. However, CUNA Mutual has over 75 years experience in insurance globally and as a mutual embody fairness and clarity for consumers.
Despite the huge crisis of consumer confidence in PPI, the financial downturn and credit crisis have created a greater need for protection in the UK. Uncertainty around employment tenure and government cutbacks have cause greater unease in many sectors. CUNA Mutual Group is calling on providers to embrace the new regulatory environment to ensure consumer confidence is restored.
CEO Paul Walsh says, “With the FSA and Competition Commission heavily involved in the industry, the Mutual ethos of profit optimisation in preference to profit maximisation is the best way forward to ensure the industry survives. Providers need to be realistic about their profit expectations and see the long term benefits of embracing the changes rather than try to get around them with terms and conditions for short term profit.”
Since the FSA regulations and Competition Commission remedies recently, prices are already creeping up and product offerings again being cut back. Products such as standalone unemployment cover have been almost removed from the market entirely or diluted with sickness cover to offset the perceived high cost and maintain a high profit stream.
Some providers have introduced so called “new” products to the market. These are increasingly individually rated on age and gender which affect price - with the view to re-rate annually. This means to consumers there is no fixed product price for all and also that this price can be increased yearly.
Walsh continued, “it is imperative that products are kept simple and the FSA regulations are followed, re-rating products annually and smoke screen offers will not work. We need to restore confidence or the industry will suffer. The abolition of the FSA could put the industry at tipping point. The industry and our regulatory environment need a sense of balance - one that protects both consumers and also allows lenders to ensure appropriate protection on loans”
CUNA Mutual caution that if the next few years are badly managed, the industry could be severely damaged and this which would have a negative impact on borrowers, lenders and intermediaries, when both jobs and credit protection are most needed.