Homeowners to Receive Mortgage Payment Protection Insurance Refunds

Over 1 million of UK homeowners, who hold mortgage payment protection insurance and who have seen unfair premium increases coupled with benefits reductions, will receive refunds, the total sum of which is expected to constitute £60 million. The Financial Services Authority raised concerns over the legality of premium increases, which resulted in insurers being obliged to pay the refunds.rnLet us remind that mortgage payment protection insurance generally covers mortgage payments for a certain period of time in case the holder of the insurance loses his or her ability to pay as a result of an accident, illness, or unemployment. Many UK insurers felt they had a right to increase mortgage payment protection insurance premiums by as much as 20-100% this year as the levels of unemployment skyrocketed.rnFSA’s investigation in the nature of these increases was first launched in March; yesterday, the body said that its negotiations with UK insurance companies resulted in an agreement to refund the increases and to cancel benefits reductions. All refunds (an average of £60, paid to new and old customers) are to be made by June 30th, 2010. According to FSA estimates, over 2 million of Brits were sold an MPPI with the mortgage; roughly 50% of those borrowers are eligible for a refund.rnThe Financial Services Authority ordered MPPI providers to offer those insurance policy holders, who cancelled within 2 or less months after changes were made, to reinstate policies. The terms of the reinstated policies must be exactly the same as they were prior to premium increases and benefits reductions. Moreover, MPPI providers were ordered to freeze MPPI terms for the rest of this year.rnGenerally, mortgage payment protection insurance policies are sold by large insurance companies through banks and building societies. The Post Office faced the most criticism for its changes made to the MPPI policy. Not only did it increase monthly insurance premiums, it also cut the max. benefit by £1000, to £1,500 and prolonged the waiting period to 3 months rather than 1.