Paul Shearman, mortgage, GI and protection proposition director at Openwork, believes there is a risk advisers will abandon the product because of a perceived hassle factor after this date.
New rules introduced by the Competition Commission will mean all types of payment protection insurance including MPPI will be subject to a seven day cooling off period from Friday next week.
Advisers will be unable to sell MPPI for the week after issuing a key facts illustration or the day the mortgage offer is received by the client, whichever comes later.
But Shearman is concerned that brokers will simply stop selling the product because they lack the systems to monitor when to get back in touch with clients to discuss MPPI.
He is also worried that the Office of Fair Trading’s requirement that brokers prove they have adhered to the cool off period will be another turn-off for brokers.
Shearman said: “There’s a real concern that it all sounds too complicated for brokers who may deprioritise the sale of MPPI.
“But that is not good for the client who may really benefit from having the product if they lose their job.”
Shearman added that in the call centre world managing the transition to the new rules would be far easier but that could mean brokers lost out.
And he added: “Awareness of this issue is far too low and it’s made worse by the fact that brokers can’t always know when the mortgage offer arrives with the client.
“The big question is whether brokers are planning to put systems in place to manage how they sell MPPI in future.”
Openwork has invested in systems and changed its IT process to accommodate the change in regulation and provide its members with a documentation trail.
Under the new rules it will be possible get a quote for MPPI at the same time as applying for a mortgage or loan but the insurance mustn’t be sold until seven days after the credit is agreed.
If MPPI is not discussed until credit is agreed then a quote should be provided at that time and brokers must wait a further seven days to complete the sale.
