Quick suggested that if the drop in sales and increased number of cancellations experienced by lenders continued, the MPPI sector would not exist in its current form in three years time.
He said: “The Financial Services Authority’s (FSA) and the Office for Fair Trading’s (OFT) recent reports have led to scaremongering in the industry. With cancellations speeding up and sales falling, insurers may eventually drop out as there’s no point being in a declining market.”
However, Simon Burgess, managing director of britishinsurance.com, said that while lenders are seeing a rapid fall in sales, small independent lenders are witnessing exponential growth. He said: “Lenders are seeing a drop-off in sales of MPPI because an increasing number of consumers realise they are being ripped off and not getting value for money. More are looking to insurance brokers for advice and that is why independent players are reporting record growth in this area.”
Bob Riach, proprietor at Riach Independent Financial Advisers, said he had not noticed a fall in sales, but argued lenders were backing off following the fallout from the recent damning reports. He said: “I guess the main change may have been the fact that lenders have stopped pushing the product in light of the recent review so there is less take up. There are certainly cases of clients being forced into taking out the cover. However, there is still a need for MPPI as clients still need to protect their mortgage – this will always be the case.”
Eric Galbraith, chief executive at the British Insurance Brokers Association (BIBA), backed this view. He said: “The MPPI market is sustainable but what we are seeing is a move from the big players towards the smaller independent players as consumers seek advice on the insurance they are buying.”
