Insurers, bankers, and lenders agree to review past sales
The Association of British Insurers (ABI), British Bankers Association (BBA), Building Societies Association (BSA) and the Council of Mortgage Lenders (CML) have agreed with the Financial Services Authority (FSA) to settle mortgage payment protection insurance (MPPI) misselling.
The FSA said firms must:
- proactively refund increases in premiums, and reverse any reductions in cover, for customers who have experienced these changes to their policy in 2009
- offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009;
- freeze premiums and cover for existing customers for at least the remainder of this year; and
- amend MPPI contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.
This must all be done by the end of June 2010.
Speaking on behalf of all four trade associations, the ABI’s director general, Stephen Haddrill, said: “Premiums need to reflect the risk but any changes not only need to be fair which we believe they are, but also to be seen to be fair. ??
“Lenders and insurers will work together on a thorough review of their policy terms and conditions, marketing material and any changes made, such as a premium increase, since the start of 2009 and make any refunds in line with the agreement.
Jon Pain, managing director of supervision at the FSA, said: "The FSA welcomes this positive move by MPPI firms to reverse recent changes in premiums or cover which will put affected customers back in the position they were in before the policy was changed. It will also give all MPPI customers clarity about when and why firms will be able to vary these in future.
"This clarity will provide the basis for MPPI to remain a valuable option for many mortgage customers who wish to take out protection, alongside the mortgage commitment they are taking on.”