Home loan cover survey `shocking'

From the Echo, first published Tuesday 14th Oct 2003.

MANY leading mortgage lenders are selling "expensive" and often "unsuitable" payment protection insurance with their loans, a new investigation reveals.

Some failed to give out policy documents, others did not tell buyers what was covered and what was not.

"The results of the investigation are shocking," said a spokesman for the Mortgage Advisers Association (MAA), which markets its own policies through its 900 members.

MAA investigators phoned the insurers and posed as potential customers to uncover the "mis-selling".

"As well as mis-selling, the ABI (Association of British Insurers) and GISC (General Insurance Standards Council) codes are being flouted.

"The codes require companies to ensure that the policies they are selling are suitable and match people's requirements."

In the calls in which mortgage payment protection insurance (MPPI) was mentioned, only 19 per cent were given an explanation of what the insurance covered. In 81 per cent of calls the caller had to ask for the information.

Some banks and building societies "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," said the MAA spokesman.

"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 officials also found that few companies were prepared to send out MPPI policy documents when they were asked to do so.

"Some companies said they would not send policy documents at all, and some would send out only limited details of cover."

The Financial Ombuds-man Service dealt with more than 700 complaints in the year 2000 to 2001. Most problems stem from people being sold unsuitable policies.