The Association of British Insurers (ABI), the British Bankers Association, the Building Societies Association and the Council of Mortgage Lenders have reached an agreement with the Financial Services Authority (FSA) that sets out a framework for dealing with recent and possible future changes to policy terms and conditions affecting some Mortgage Payment Protection Insurance (MPPI) customers.
The agreement is a response to FSA Chairman Lord Turner’s comments on MPPI at the ABI’s Biennial Conference in June 2009, where he expressed concern about increases in premiums, or reductions in cover, on MPPI policies during the recession.
The financial services industry has reached this agreement with the FSA to reassure customers, minimise market confusion, maintain confidence in MPPI and ensure that people who have MPPI can maintain their cover, especially in these times of continuing economic uncertainty.
Under the agreed framework, mortgage lenders and insurers will work together to review the terms and conditions of all their MPPI policies and associated sales and marketing materials to ensure that any potential future changes will fall in line with the agreement. Firms will contact all affected customers individually to let them know what the changes are and how their policy will work in the future.
Firms will also review any premium increases and other changes that resulted in cover being cancelled or reduced since 1 January 2009. Any of these changes that are found not to be in line with the agreement will be reversed.
The agreement specifies that all reviews and any actions relating to past, current and future policies, including any premium refunds that might be due, should all be completed by the end of June 2010.
Customers do not need to take any action at all at this stage. If their policy is affected in any way, their mortgage lender or insurer will contact them individually.
Speaking on behalf of all four trade associations and their members, the ABI’s Director General, Stephen Haddrill, said:
“MPPI is an important product and is playing a key part in helping to keep people in their homes during the recession. It can offer a lifeline to people who may otherwise have faced losing their home. These policies provide extremely valuable cover for customers and this agreement is all about ensuring that they continue to do so. As with all insurance, premiums need to reflect the risk but any changes not only need to be fair which we believe they are, but also to be seen to be fair.
“Lenders and insurers will work together on a thorough review of their policy terms and conditions, marketing material and any changes made, such as a premium increase, since the start of 2009 and make any refunds in line with the agreement.
“MPPI customers do not need to take any action, although it is important that they continue to pay their premiums to ensure that their cover continues. Their mortgage lender or insurer will contact them if their policy is affected in any way.”
