Posing as customers, MAA Staff phoned the UK’s top ten mortgage lenders to obtain quotes for a mortgage, making 50 calls in all.
Some lenders failed to ensure that the MPPI sold alongside the mortgage was suitable for the buyer; refused to give out policy documents; or, give the most basic explanation about what’s covered or, more importantly, what’s not.
As well as mis-selling, MAA concluded that the ABI and GISC codes are being flouted, as the codes require companies to ensure that the policies they are selling are suitable and match peoples requirements.
In the calls that were made where MPPI was mentioned, only 19% were given an explanation of what it covers and in 81% of calls the caller had to ask for the information. Astonishingly, Abbey National, Barclays, Nationwide and The Royal Bank of Scotland offered no details about what MPPI covered in any of the calls.
Incredibly, unless prompted, not a single caller was asked about their medical history, or was told that pre-existing medical conditions wouldn’t be covered, as required by the codes. This is worrying as such exclusions are a major reason why claims are refused.
Only a third of callers were asked for any employment details – this is an area that causes major problems when claims are made, especially for part-time and contract workers, and the self-employed, who may not be eligible for MPPI.
MAA also found that few companies were prepared to send out MPPI policy documents when they were asked to. Some companies said they would not send policy documents at all, and some would send out only limited details of cover. Some of the companies justified not sending out policy documents, by saying that once MPPI cover is taken out and the policy documents have been received and read, if the policy then turns out to be unsuitable, the MPPI can be cancelled and the premiums would be refunded.
"This is totally unacceptable", says Emily Moorcroft, Director of MAA. "Companies should ensure that an insurance policy is suitable before it is sold and should rely on the right to cancel."
MAA found a £24.37 per month difference between the cheapest and the most expensive premiums for MPPI on an average mortgage of £650 per month. Nationwide charged £32.18 compared to £50.05 from Cheltenham & Gloucester and only £25.68 from www.mortgage-protection-insurance.com for full ASU cover.
The Financial Ombudsman Service dealt with more than 700 creditor complaints in the year 2000 to 2001. Most problems stem from people taking out unsuitable policies.
Emily Moorcroft further comments, "After life insurance, MPPI is possibly the most important cover available to mortgage borrowers. It is scandalous that mortgage lenders are putting their own vested interest before the interest of their borrowers and selling cover that is both expensive and highly restrictive when compared with MPPI available from independent providers.
"MAA will ensure that all of its members will offer best advice in the sale of MPPI to further promote consumer confidence".
