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MPPI selling is not a level playing field

With Christmas fast approaching, consumer debt is likely to be stretched even further than the record levels it is at now. With this in mind it's important that your clients consider some form of financial protection.

Payment protection insurance, the product designed to protect borrowers from financial hardship, has been the subject of increasingly hostile media coverage and criticism from consumer groups for being over-priced, poor value, opaque and of marginal benefit.

One major problem is that brokers, who place some 60% to 70% of new mortgage business, are only responsible for 25% of all MPPI sales at most – even though they have access to better products than lenders in terms of pricing and cover.

If MPPI should underpin your clients' financial health, market penetration is woefully low and mortgage brokers' contribution is much less than it should be.

Perhaps the sales process is not cost-effective and too time consuming, or maybe there is widespread concern about the products' negative image. Maybe it's easier to pass in favour of lenders' inhouse products. But if those products are inferior to those available on the open market, how does that fit with general insurance regulations and best advice?

There is concern among brokers that they operate in a best advice minefield, being far more exposed to mis-selling claims than banks and white label operations that enjoy information-only status and a less intrusive regulatory regime.

Such concerns may be mere perceptions but there is real substance to the charge that when it comes to selling MPPI, it is not a level playing field. This, no doubt, is a significant factor in brokers' seeming reluctance to sell the product.

As a broker, you should at least make your clients aware of the problems they could face without protection. Christmas is a time of giving. Make sure your clients are on the receiving end of some good advice.