Concerns raised over mis-selling of mortgage payment protection insurance
FINANCIAL ADVISER - 11TH DECEMBER 2003
Mortgage lenders are offering unsuitable and overpriced payment protection insurance packages, according to the payment protection insurance broker Burgesses.
The broker’s managing director, Simon Burgess, telephoned the top 25 mortgage providers by sales volume, posing as a potential client, and found that the average cost of mortgage payment protection insurance they quoted was on average almost twice that available through careful shopping around.
Mr Burgess contacted the lenders pretending to be a self-employed accountant looking to remortgage the home he had owned for 10 years, and claimed he was off work with stress and high blood pressure due to the death of a parent. He was quoted an average of £6 a £100 to be covered, with Lloyds TSB offering a package for £7.70 a £100.
Mr Burgess, who called the results “disgraceful”, said that all 25 failed to inform him that he could look around for a better rate, and that only one lender asked about his medical history or explained that mortgage payment protection insurance automatically rules out claims for pre-existing medical conditions.
Furthermore, no lender explained that full mortgage payment protection insurance with redundancy cover was not appropriate for Mr Burgess since, being self-employed, he could not be made redundant.
The watchdog General Insurance Standards Council is concerned about the selling of mortgage payment protection insurance. A spokeswoman said: “There is evidence that an awful lot of this insurance is sold to unwitting customers. They are being sold something they don’t want, which is morally wrong and bad business practice, and in many cases they are being sold loan payment protection insurance that is of no use – and that is fraud.”
