Industry acts to address insurance anomalies
The potential problems caused by the delay between a mortgage completion and the placing of life insurance cover is to be addressed at a meeting of mortgage and life insurance representatives next month.
Richard Verdin, sales and marketing director at Lifequote, which is leading the initiative, said complicated under-writing processes meant more and more borrowers taking life insurance alongside a mortgage were finding their mortgage was ready but their life cover was not.
He said: “This needs to be addressed because customers who are being pushed into a housing transaction by people above or below them in the chain, end up taking their mortgage without the necessary life cover and that is a big risk. We believe that is unacceptable and it has to change.”
Verdin said in terms of an overall risk objective, a case could be made for greater leniency in the industry’s approach to writing mortgage life business, as opposed to life business not attached to a mortgage transaction. The meeting will be chaired by reinsurer Swiss Re.
Commenting, Chris Cummings, director general of the Association of Mortgage Intermediaries, said any initiative that brought the industry together to benefit consumers was always a good idea. He said: “I think it has been a matter of long-running concern, so it is good to see the industry tackling the issue.”
Welcoming the initiative, Rod Murdison, proprietor of broker Murdison & Browning, said some of his clients had experienced delays between the completion of their mortgage and the placing of their life insurance cover. He said: “It is okay for younger lives when life cover needs to be rebroked because theirs normally flies through, but I have had a couple of circumstances where someone’s health has deteriorated in the interim and their life cover needed to be increased.”
Murdison said the delay caused by the need for a doctor’s report in such cases created a scenario where the client was faced with completing with less life insurance than needed for the size of their new mortgage.
James Rodea, director at Savills Private Finance, acknowledged the need for insurers to make sure their risk was secure but described the current system as flawed. He said many borrowers did not want to go to the trouble of taking out life insurance at all because of the extent of underwriting required.