Goodfellows has calculated that general insurance premiums for household and Mortgage Payment Protection Insurance (MPPI) cost, on average, around £20 each per month (£240 each per annum), for an average mortgage borrower owning an average home having obtained quotes from a selection of independent providers such as Paymentshield, CETA and Select & Protect, compared with an average of over £30 from mortgage lenders.
With monthly general insurance policies lasting on average five years* not only will a client save over £1000 in premiums (£10 per month saving x 2 x 60 months= £1200), but the broker or IFA will earn £660 in commission - £20 (premium) x 2 (household plus MPPI) x 60 (five years) x 27.5% (commission).
Goodfellows’ Managing Director Simon Burgess says: "We all know that mortgage lenders are increasingly desperate to sell general insurance to our clients by the calls and the direct mail they receive. One could assume that this is to save us the trouble. However, the real reason is that it is highly profitable for them with individual commissions running into hundreds of pounds."
Mr Burgess continues: "Furthermore, not only is it best advice to provide ones clients with access to independent policies that are better in content and price than those offered by the lenders, it is simply crazy to allow them to profiteer at our own and our client’s expense, by selling second rate policies with highly inflated premiums."
This view is confirmed by the Mortgage Advisers Association, Operations Director, Richard Bannister-Green, who says: "It is not uncommon for mortgage lenders to take in excess of 80% of a client’s premium in commission and over-rider payments. This does not leave very much in the pot to pay claims, which may lead to problems in the long run."
