Mortgage intermediaries widely support the "de-bundling" of accident, sickness and unemployment PPI, but some industry figures argue consumers will not necessarily benefit from such a change.
According to the Association of Mortgage Intermediaries’ (Ami) March Mortgage Intermediary Census on Payment Protection Insurance (PPI), 93% of respondents support “de-bundling”, allowing each benefit to be bought separately as appropriate to the customer’s sick pay or other relevant circumstances.
A further 92% of respondents support “de-linking”, which Ami says would enable customers to be clear they are free to choose a PPI provider that is separate from the lender and would mean PPI would not be compulsory with any mortgage scheme, allowing advisers to compare the terms available from different PPI providers.
Rob Griffiths, associate director of Ami, says: “Support for ‘de-linking’ and ‘de-bundling’ of PPI products was almost unanimous and the introduction of these changes will have a positive impact on the suitability of PPI as a protection product.”
But Roger Edwards, products director at Bright Grey, argues while de-bundling would give consumers more choice, it would probably be more expensive for consumers if they bought each accident, sickness and unemployment element separately instead of buying a combined product.
Further, although some consumers may only require one of the three elements, Edwards says they would need to do a lot of research to ensure the cheaper products did not have exclusions.
The Financial Services Authority (FSA) and the Office of Fair Trading (OFT) have raised concerns about the suitability and transparency of PPI, but Edwards believes de-bundling will not solve these issues.
He adds: “People can combine the benefits, but there are other things to be aware of. It is not always clear what products cover and people will need to do extra work to marry cost with price.”
Likewise, Gerry Warner, protection development manager at Zurich, believes de-bundling is likely to be more expensive than a combined product because each element would have to be administered independently with separate literature for each.
Further, he points out the life market has been moving to more menu-based products, which allow several benefits within one plan with one set of underwriting, whereas de-bundling is a move in the opposite direction.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].
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