Mortgage protection bills could rise 40%

MORTGAGE holders face hikes of 40% or more in their mortgage protection premiums because so many people are claiming on their policies due to loss of earnings in the recession.

The latest company to confirm it is to raise the premiums is Genworth Financial, which has a 37% share in the mortgage protection market and which underwrites cover sold to many of the country’s top lenders.

In letters sent out by financial institutions through which Genworth Financial offers its products, customers were told the pricing of mortgage protection policies had been developed at a time when unemployment was at historically low levels and was based on the level of forecasted claims at that time.

“Unfortunately, as you are aware, the economic environment has deteriorated rapidly over the past year which has resulted in an unprecedented surge in unemployment in Ireland since the beginning of 2008,” the letters said.

“As a result Genworth Financial is experiencing a dramatic increase in the number of claims submitted for unemployment submitted on our Mortgage Payment Protection insurance policies. Claims incurred in the last nine months alone have exceeded all of the claims in the preceding five years... we have agreed that in order to ensure the future sustainability and viability of this cover for all insured members we regrettably need to increase the monthly cost of the cover. This is a situation that is being faced by all providers of mortgage payment protection insurance in Ireland.”

It said a policy premium increase of an average of €9 per month had been added to customers’ bills. However, some customers have found their increase is as much as €18 or 40%.

“We hope to avoid further increases but this will depend on the economic situation,” customers were told in the letters. “We are making the price increase in response to the rise in the national unemployment rate and also in anticipation that it might continue to rise in the near future.”

Furthermore, the company has lengthened from 30 to 60 days the period which must elapse from the start of a new policy before people can make a claim on it.

Earlier this year Cardif Pinnacle, which underwrites the redundancy insurance sold by members of the Professional Insurance Brokers Association, upped its premiums from €57 to €78 a month for monthly mortgage payments of €1,200.