Burgess’ mortgage payment protection insurance laments fail to account for improvements
MORTGAGE STRATEGY - 16TH APRIL 2007
So Simon Burgess has stuck his head above the parapet again. Oh joy, more negativity. In his own words, he does not derive any pleasure from "being the one to knock the industry and lay bare its problems for all to see".
Nice one Simon, the self-appointed crusader of hard done by and ripped- off consumers.
A few weeks ago I was asked to speak at a Council of Mortgage Lenders seminar on mortgage payment protection insurance, attended by the Financial Services Authority, the Consumer Competition Commission and the Office of Fair Trading.
Having sat and listened diligently to what all the parties had to say, it became clear that the mortgage payment protection insurance prognosis is not nearly as bad as Burgess would have us believe.
Yes, payment protection insurance has some chronic problems - no-one has ever doubted that - but mortgage payment protection insurance is not as unhealthy as Burgess diagnoses.
A bit of history. Following 1991's property recession and the consequent high repossession levels, the Sustainable Home Ownership initiative was created, although it didn't come into force until 1999. Yes, things take time in this industry.
SUSHO had a simple objective - to increase mortgage payment protection insurance take-up and cover for high-risk groups, boosting their capacity to ride out the economic cycle in order to sustain home ownership.
The mortgage payment protection insurance target take-up rate of SUSHO, which still exists today, is 50%. Of concern to all parties present at the CML seminar was that the protection rate is now at perilously low levels - just 23% of customers have their repayments covered.
There have also been huge strides forward on the product front, none of which Burgess cares to mention. But hey, let's keep up the negativity and the doom and gloom and hope that another housing recession never happens.
We could also happily live a pastoral life picking nuts and berries, especially if our houses have been repossessed.
Given the Treating Customers Fairly initiative, responsible lending, Mortgage Conduct of Business, Insurance Conduct of Business, the FSA's thematic review of payment protection insurance (which blackandwhite.co.uk voluntarily took part in) and the efforts of the Association of Mortgage Intermediaries, there has been progress made on mortgage payment protection insurance.
My advice to mortgage brokers - make sure you are covering the mortgage payment protection insurance question with your customers. It's not particularly TCF to leave them exposed.
Also check out mortgage payment protection insurance providers like Assurant - it has brilliant TCF and FSA-friendly products. Indeed, the only thing I have in common with Burgess is that we share the same product provider for mortgage payment protection insurance. Oh the pain.
And one final point on single premium policies. Why sell a client with a demonstrable track record of having their monthly direct debits cancelled a monthly mortgage payment protection insurance policy? Try explaining that one to the FSA or Sir Trevor McDonald.
Thomas Reeh Chief executive officer Blackandwhite.co.uk
