The reason for this is that the majority of MPPI policies represent very poor value for money with the majority of premium being used to pay commission and not claims.
In fact, the vast majority of MPPI policies are designed, with their 60 day excess periods, to avoid claims at all cost. Latest figures from the Council of Mortgage Lenders (CML) show that the ratio of claims paid on MPPI policies has fallen year-on-year from 6.4 per cent in 2003 to 4.3 per cent by the end of 2005.
In order to improve sales, two major improvements need to be made immediately.
Firstly, more claims need to be paid and loss ratios need to be increased to the level of home and motor insurance where customers have an expectation that they have a chance of getting their money back.
Secondly, the industry needs to deal with the issue of affordability for younger people, who simply believe that they cannot afford the ‘luxury’ (sic), of protection once they have paid their mortgage costs.
Until these two issues are addressed, claims ratios and policy prenetration figures will continue to diminish.
Quality MPPI products are out there – it is just a case of taking a little less in commission and giving a little more in claims.
Simon Burgess
Managing director
Britishinsurance.com
