Infotech

Towards more readable borrower insurance



Posted on Oct 19, 2021 9:56 AMUpdated Oct 19, 2021, 6:11 PM

Bankers and insurers have come to an agreement to avoid certain unpleasant surprises for their clients. They have decided to strengthen the information provided to borrower insurance policyholders, the Financial Sector Advisory Committee (CCSF) announced on Tuesday.

These changes, concerning guarantees such as contract prices, should make it possible “to better inform the choices (of consumers) and promote the comparability of offers”, underlines in a press release the consultation body between representatives of the financial sector and consumers.

It was at the request of the Minister of the Economy and Finance, Bruno Le Maire, that the CCSF worked, again this year, on this market as dynamic as it is disputed between bankers, insurers and brokers.

Underwritten by people who go into debt to buy a home, insurance must guarantee the coverage of all or part of their credit in the event of accidents or illnesses leading to death, loss of autonomy, or even disability.

It is in particular on this notion of disability that bankers and insurers promise to provide more information. Because a 2020 report underlined that this guarantee was one of the main reasons for customer complaints in borrower insurance.

“Invalidity 2”

Concretely, insured persons recognized as “invalidity 2” by Social Security were surprised not to be able to use the “invalidity” guarantee of their contract to assume their credit. And this, “even though they had been covered by their contract under the incapacity guarantee”, notes the CCSF.

The incapacity guarantees aim to cover the insured person unable to return to work until his state of health is consolidated. They are therefore linked to a temporary situation, unlike invalidity guarantees.

In detail, the CCSF recommends that insurance distributors “clearly” explain whether the invalidity guarantee of their contract refers or not to the concept of invalidity recognized by Social Security “or any other competent body”.

An “essential” measure

If this is not the case, they must make it clear that being recognized as disabled by Social Security is not “binding on the insurer”. “A careful reading of these operating conditions specific to the contract subscribed must be carried out by borrowers to select their insurance,” insisted Tuesday the French Banking Federation (FBF).

The CCSF also recommends developing information on the borrower’s insurance rate by indicating to the customer “the cumulative amounts of his premiums after eight years of insurance”. The idea is to help the consumer to navigate between premiums which can be fixed and calculated on an initial capital or degressive on an outstanding capital.

This measure is “essential” in the eyes of the association for the defense of consumers UFC-Que Choisir. Because “an insurance contract which may seem at first glance interesting over the total duration of the loan, may not be when we look at the effective duration of this credit”, explains Matthieu Robin, project manager at the association.

Status quo on termination

This notion of effective duration is important because if the French borrow on average at 19 years for their mortgage, the real average duration of loans is 8 to 10 years due to early repayments, noted the CCSF in 2020.

Insurers and bankers, on the other hand, have still not succeeded in reaching an agreement to institute an infra-annual contract termination, which could potentially further open up this market dominated by bancassurers. These support the maintenance of the current framework for termination on the anniversary date of the contract.

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