Responding to pressure from the Financial Services Authority
(FSA), UK insurers active in the mortgage payment protection
insurance (MPPI) have agreed to a package of measures including
refunds totalling about £60 million ($100 million) to 1 million

Pressure was brought to bear on MPPI market participants by the FSA
following recent increases in premiums and reductions in what
customers are covered for under their policy. The FSA’s concerns
centred on terms permitting these changes and clearly with which
they were disclosed. Following discussions initiated by the FSA
with relevant trade bodies and some insurers, market participants
have agreed to:

• Refund increases by no later than June 2010 in premiums and
reverse any reductions in cover for customers who have experienced
these changes to their policy in 2009;

• Offer to reinstate policies where a customer had cancelled it
within two months of an increase in premium or reduction in cover
made during 2009;

• Freeze premiums and cover for existing customers for at least the
remainder of this year;

• Amend MPPI contracts to ensure that all customers are made aware
of the circumstances in which firms have the right to vary premiums
and cover; and

• Notify customers in writing, giving at least two months notice,
explain the basis on which the premium may be increased and/or
cover decreased after 1 January 2010.

Commenting positively on the FSA’s actions Lucy Widenka, consumer
advocacy group Which?’s personal finance campaigner, said: “We’re
pleased that the FSA has taken action against firms who have
effectively been selling people umbrellas then trying to take them
away at the first sign of rain.”

The FSA noted that the MPPI refund is a unique solution to a
specific set of FSA concerns and does not set a