An independent investigation into mortgage payment safety nets has found little to recommend in Mortgage Payment Protection Insurance (MPPI). Paying the mortgage? A systematic literature review of safety nets for homeowners, from the Centre for Housing Policy at York University, found that while 13% of those in mortgage arrears had MPPI, only 1% had made a claim on the policy.
The report put this down to the many circumstances leading to arrears which are not being covered by the insurance, such as relationship break-downs and having to give up work to care for relatives. Karen Croucher, a research fellow at York University and co-author of the report, said: ‘Quite a lot of reasons why people go into arrears on a mortgage are unrelated to the things covered by MPPI. The product does what it says on the box. In case of accident, sickness or unemployment it pays your mortgage for a year, it is not a dishonest product, it is just limited.’
The report noted that there was little relation between perceived or real insecurity and take up of the product, and that between 40% and 50% of mortgagors would get little benefit from MPPI as they have sufficient savings or other household income to cover mortgage payment.
Charles Ansdell, senior technical adviser at intermediary Inter Alliance, pointed out that while MPPI is not comprehensive it has got a lot better over the last two or three years. He said: ‘The product is still young, and it takes time before products are priced efficiently and risks are insured effectively. MPPI is by no means the finished product. Because it is basic insurance and not individually underwritten it has exemptions. It is possible that it will move towards individual underwriting which would make it more inclusive.’
The authors acknowledged the low opinion of MPPI in the eyes of intermediaries, but refused to condemn the product themselves. ‘We, as a team, just looked at the evidence, and there is not a lot of evidence that MPPI is good value for money. However we would be cautious about our conclusions, it works for people some of the time,’ said Croucher.