Legal & General Increases the MPPI Cost

Legal and General, one of the largest players on the UK insurance market, has recently announced a rise in the cost of the insurance covering mortgage repayments in case the borrower loses his or her job. The company’s move can be explained by a rapidly growing number of arrears and repossession in the property sector. The actions of Legal and General caused the outrage of its clients as the new rules apply not only to new customers, but to existing as well. Legal and General has approximately 50,000 customers who have purchased the insurer’s mortgage payment protection product. Mortgage payment protection insurance guarantees the repayments of mortgage for up to 12 months in case the borrower loses a job or gets into an accident/illness. The revised cost of the insurance, which was raised by 39%, will mean that a customer with a £200,000 loan offered at 4% interest rate (£1,055), will see the increase in premiums from £44 to £61 and an increase in the monthly total cost from £1,099 to £1,116. Legal and General is not the first insurance company to increase the cost of insurance. Earlier this year Pinnacle and Hitachi increased the costs by 40%, Norwich Union - by 30%, and Paymentshield – by 20%. Insurance and mortgage brokers are determined that the approach of Legal and General is not fair towards its frequent customers. Brokers say that those, who have been using the company’s services for years should not be treated as new customers and, of course, they should not be penalized. According to the Association of British Insurers, the cost of mortgage payment protection insurance increased by 200% last year.