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  #1  
Old 05-08-2011, 08:30 AM
digweed digweed is offline
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Default Mortgage protection (life assurance) - Discounts & moving provider

Hi All,
I currently have mortgage protection (terms based) life assurance for myself and partner, which we were required to take out when we took out a mortgage 5 years ago.
Now that things are a lot tighter, I was looking for ways to reduce this cost, while maintaining the required cover for the mortgage.

Remaining term: 30 years
Mortagage: 306,000

I think the 'terms' option is more expensive than the basic. I've been shopping around and there seems to be good deals on mortgage protection now.

Question 1:
How easy is it to cancel or get rid of my current policy and switch to a new provider? Are there any penalties or things to watch out for?

Question 2:
There are a lot of offers at the moment, giving 50% - 75% off the first year's premium. Monthly cost is working out at about 29 (cheaper than I'm paying at the moment). However, there are big discounts for the first year e.g. 150 total for the first year, then 342 per year thereafter. This sounds good, but does this mean that I cannot move insurer again in a few years if I find a better deal? One company I spoke to yesterday said that the discount was based on the 30 years of cover and that I would be in breach of the discount agreement if I cancelled the policy in the future. Is this correct?

Can someone shed some light on this please?


Cheers,

digweed
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  #2  
Old 07-08-2011, 12:26 AM
StevieC StevieC is offline
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In reply to your questions;

1) Mortgage Protection cover is cheaper than level term assurance because the sum assured decreases each year rather than staying the same. If you have an interest only loan, your lender can insist on a level term policy but if its a normal repayment loan then mortgage protection cover will suffice.

2) It is easy to change your policy. Once you have a new policy, inform your lender, ask them for a new deed of assignment, complete this form and return it to your lender with your new original policy document, cancel your payment with old provider (contact your bank if you pay by direct debit), inform your old provider that you no longer require cover. The thing you need to watch for is to make sure you have new cover before cancelling your old policy, you dont want to be without cover and then find you cant obtain new cover. There shouldnt be any penalties for cancelling a term assurance policy.

3) There is nothing to stop you changing your policy again in a few years if you find a better deal or your circumstances change. If someone said that their offer is conditional on this, then you should seek another provider as this would not be best practice. Financial advisors should always act in your interest and tying you into a policy for 30 years when you may sell your property and no longer require the cover is not best practice.

Hope this helps.



www.CheaperLifeAssurance.ie
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  #3  
Old 08-08-2011, 04:39 PM
Sumatra Sumatra is offline
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"There is nothing to stop you changing your policy again in a few years.."

or next year?

Stevie, what are your views on churning?
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Old 08-08-2011, 05:00 PM
StevieC StevieC is offline
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My view is that churning is a bad practice and that its not in the interest of the customer as it ultimately leads to higher prices for the customer.

I always act in the interests of my customers and anyone who suggests otherwise doesnt really know me.
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Old 09-08-2011, 09:11 PM
Sumatra Sumatra is offline
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Let me be clear from the start. I don't know you personally and this is no questioning of your character, motives or conduct.

Bad practice sounds too mild a word for something we in the industry call churning. In essence it is intentional deception and yes, customers do it too.

The practice is encouraged by large commission payments (which are clearly not in the consumers best interests) and without reducing such payments the only way to discourage the practice is through commission clawback (keep the business on the books for 5 years or else type commission) and possible non payment of claims.

The only way to effectively regulate this is by annually examining the turnover of an intermediaries client base and compare it to stated annual earnings.
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Old 09-08-2011, 10:17 PM
pj111 pj111 is offline
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Apart from the price going up every year as you get older one runs the risk of either non disclosing or actually getting sick which may prevent one from obtaining new cover.
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Old 10-08-2011, 12:05 PM
digweed digweed is offline
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Thanks for the all replies everyone.
So I've noticed a lot of providers offering discounts to move mortgage protection, but this would imply that it is easy (and legal) to do so.

It still doesn't seem very clear to me. It sounds like those providers who gain, see it as ok. Whereas those who lose business see it as a problem??

Assuming you're getting a better (cheaper) deal by moving provider, is it correct to say that you can move mortgage protection, legally, at any time without penalty?

Cheers,

digweed
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  #8  
Old 10-08-2011, 12:22 PM
NorfBank NorfBank is offline
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Quote:
Originally Posted by digweed View Post

Assuming you're getting a better (cheaper) deal by moving provider, is it correct to say that you can move mortgage protection, legally, at any time without penalty?
Yes but (there's always a but) cheapest is rarely best.

It's a common misconception that mortgage protection from one insurer is identical to mortgage protection from another. It's not. Be 100% sure that the insurer you are moving to offers the same (or better) benefits than the one you are moving from.
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Old 11-08-2011, 12:14 PM
Sumatra Sumatra is offline
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Problem is you come across a broker who is happy to mislead the insurer that pays him for business that will never stay on the books.

Most insurers will happily adapt a clients existing policy to suit their revised needs so there should be no real need to rebroke the policy. But unnecessary churning happens and it happens for one reason only and that is to earn commission. Its nothing to do with the best interests of the customer because if it was there would be many doing alterations to existing policies than the quick misleading advice given at present.

The industry is addressing the lack of moral standards in the broker community by the successful implementation of clawback which some will start to feel the effects by this time next year and good riddance to the bad eggs.

From the consumer point of view and 'legally' etc well failure to disclose all material facts could render your contract void. Material facts are always those which may influence an insurer in the assessment and acceptance of the proposal for insurance and they clearly state if you are unsure as to whether certain details are material then you should disclose it. Where is the peace of mind having insurance is supposed to give if one constantly misleads by unnecessary churning? Its your signature on the form.

In passing Norfbank, I'd worry if I was with an insurer that could not adapt my existing policy to suit my revised needs without me having to take out a new policy. Also I'd worry about a system that also discourages advisers to act honestly by moving to a once-off per client type commission. Honesty, integrity and high standards are required from both sides.

My personal opinion is to get rid of commission altogether. It has never worked to the best interests of the consumer and its getting worse.
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Old 19-08-2011, 03:33 PM
Baracuda Baracuda is offline
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Hear what your saying Sumatra but the problem with the life companies is that not all of them have changed the way they are paying commisions and the unscrupulous broker's that are out there will still continue to bounce products over to these companies until such time as all the comnpanies use the new system of clawback and retention commision. All that said the new system is far from perfect and rewards retention of business after a set amount of years but it still may be attractive to bounce the business after 5 years given that the initial commision would be higher than the retention commison and clawback.

The other side is that comsumers maybe disadvantaged as a result of this because brokers/advisors may not be bothered moving business to save money due to the fact that they may face a commision clawback/loss of retention commision etc..

Where I work we do not get paid commision but instead get paid on the overall value of the book of business and face a reduction in pay if retention targets are broken so we bend over backwards to save business being rewritten, so much so that we work harder saving business rather than trying to write new business. Until the industry starts using this approach it will be next to impossible to weedout the unscrupulous broker/advisor.
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  #11  
Old 24-08-2011, 08:57 AM
Sumatra Sumatra is offline
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A broker who must sell a policy to make a living is under quite similar pressure as an employee who must maintain a book to maintain a job.

With both you still have churning and churning is nearly always an unethical sale which only sometimes benefits the customer but always benefits the seller. It has become such a common practice that you'll even see occasional inappropriate direction given here and some of it signed.

I can see the advantages and disadvantages of the business model you work under. From this side, recent changes to commission payments makes it appear to be all about money upfront for the seller and trying to exceed the break even point for the provider. Surely if providers cannot agree a standard platform, then in the consumers best interests we really should be thinking about regulating commission payments. In the meantime there is nothing stopping providers from being seen to be acting in a way that maintains integrity of the market and where the spin off for them would be creating a built in incentive for intermediaries to support their clients.

Until that time if an intermediary has demonstrated they are only capable of a low persistency rate then what is the justification of continuing to pay them high upfront commission when it would be logical to put them on spread commission.
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