MPPI providers agree customer refunds of £60m

by Gill Montia

Story link: MPPI providers agree customer refunds of £60m

Lenders and insurance companies who have sold Mortgage Payment Protection Insurance (MPPI) alongside home loans have agreed to refund a total of £60 million to customers who have seen their premiums rise during 2009.

Back in June, the Financial Services Authority (FSA) noted that some MPPI provider were responding to the recession by increasing premiums or reducing cover for existing policyholders, just at a time when they were more likely to make a claim.

FSA chief, Lord Turner, warned that this raised issues with both unfair contract terms, disclosure, and the regulator’s Treating Customers Fairly Principles.

However, following discussions initiated by the FSA with relevant trade bodies and some firms, MPPI providers have agreed to:

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.

Firms have agreed to contact customers if their policy is affected, and will make all refunds by the end of June 2010.