MPPI: Rising from the ashes

With sales levels about a third of their previous highs, Frankish is among those suggesting that the new regulations could be a big step in salvaging a decent product.

“You could argue it’s a good thing for the customer to think about what they’ve bought because what you don’t want is a customer to cancel six months in,” he said.

“Positioning it up front with the customer will be very important and keeping in touch and advising when you will be speaking again is also very important.

“In this business now, it’s all about customer service and fully explaining what you’ve done and them ­understanding what’s been done,” he added

This is a view echoed by many advisers who have become accustomed to the rapid sea-changes taking effect periodically.

While the increased regulatory demands may be seen to penalise good advisers, some have suggested it does serve the purpose of ridding the industry of the less desirable element and should hopefully lead to a better informed client.

Dean Mason, principal of Masons Financial Planning, concurs with this and many of Frankish’s sentiments around the PPI debacle.

“Something needed to be put in place,” he said.

“There are a lot of myths around MPPI and a lot of things have got to be put behind us. We need to move on and we’ve already seen with IP’s unemployment add-ons that there are other options out there.”

Mason suspects many advisers will start branching out and looking at other more traditional protection products. He also applauded most of the incoming regulation and sales controls.

“The point-of-sale prohibition is a brilliant thing because it does cut the sharks out and means they can’t demand people to sign before they get the loans,” he continued.

“From my point of view, I think it will switch the emphasis. But any broker worth their salt has already been looking at IP as a credible alternative anyway.

The reality for most advisers is to get the loan approved first and then have a separate chat about insurance options.

“That suits clients because they’ve got what they want the loan and are able to focus on the next stage.

So, I do like the almost pre-cooling off period,” he added.

However, it seems most likely that it is at the macro rather than micro scale that the fate of MPPI will be decided.

If legislation such as more open marketing materials encouraging a wider choice for consumers and publication of claims statistics does prove too onerous for providers, it could see some pull out.

Paul Broadhead, head of policy at the Building Societies Association, is currently overseeing research at the organisation about the need for people to protect their mortgages.

While recognising the current bad perception of PPI by the public, he had another suggestion for lower take-up rates of protection with mortgages.

“One reason is they expect to be bailed out by the government like the banks were, following the introduction of a raft of schemes from the previous government,” he said.

“But there is also the negative publicity surrounding PPI (particularly single-premium PPI) that tainted MPPI, so we felt now was the time to carry out some work that many people need protection.”

REPAIRING A STAINED IMAGE

This work involved conversations with insurers and seems to indicate that they are beginning to lean towards an income or lifestyle protection product operating similarly to IP, with a proportion of income being paid relating to redundancy rather than either paying the mortgage or loan payment.

Broadhead is pleased that action has been taken to address the PPI problem.
“It’s a good shift,” he said.

“The key thing is if someone gets into difficulty, they could lose their home and the lenders often make a loss when property goes to repossession.

So, it has to be a good thing if penetration is higher as long as the product is right.

“It’s also a good thing for the government because at the moment where people are not taking out protection, all these schemes cost taxpayers money.

Broadhead concluded by calling for more reliable and transparent products to be produced to satisfy consumer concerns.

“So, if the private sector can step up and plug that gap with a product that’s more respected by consumers and recognised as being worthwhile and cost effective, I think it’s a win-win for everybody.”

Given all the positive messages coming through about the Competition Commission and other regulators’ interjection in the PPI market, it seems a surprise it took so long to come.

Or perhaps advisers are so used to marked regulatory shifts that they can take them all in their stride?