Mortgage borrowers speak out on PPI sales

Over 30% of new mortgage borrowers over the last year “felt pressurised” into buying associated insurance products! And this figure has increased from the previous year.

The Financial Services Authority has announced a fine for a card provider over Payment Protection Insurance. PPI is an insurance that covers individuals in case they cannot meet payments as a result of illness or unemployment.As the PPI industry is worth an estimated £5.5bn a year, some financial services companies are anxious to ensure that they maximise sales.

A 2 year research project by Capital Blue – a market research and benchmarking company – has revealed further problems in the sale of associated insurance sales linked to new mortgages. Capital Blue surveyed over 15,000 people who had recently completed mortgages (7,800 within the last year) and asked if they “felt pressurised” into purchasing ancillary products with their mortgage including life assurance, buildings, contents redundancy and PPI insurance.

Key Findings over the last year –

11% of respondents to the Capital Blue survey “felt pressurised” into purchasing PPI

13% of respondents “felt pressurised” into buying contents insurance – an increase from 11% in the previous year

17% of respondents “felt pressurised” into buying buildings insurance – an increase from 15% in the previous year

14% of respondents “felt pressurised into buying life assurance – a decrease from 17% in the previous year

31% of respondents “felt pressurised” to purchase ancillary products – an increase from 28% on the previous year

These results have declined and indicate that either:

the customer is not convinced that they need the product, or
they can’t afford the product, or finally
the motives of a substantial percentage of advisers and sales processes are not focussed on customer needs.

With the current pressures on margins in the financial services industry, it is likely that consumers are likely to report an increased level of “pressure to buy” in future surveys. The FSA will need to be aware!