Insurance policy through mortgage broker- advice needed please

saverstacey

Hi,

When we bought our home 2 years ago, the mortgage broker insisted we took out our life insurance policy through them. We signed an agreement to this effect. We then discovered (through this site) that the policy they had introduced to us was waaaaay more expensive than competitors and also included critical illness cover which we had never wanted. So we cancelled the poilcy. The mortage broker then began sending letters asking for a payment of £4000 ish to cover their lost comission in accordance with the agreement we signed. We asked them to provide an alternative policy, without critical illness cover, and at a competitive rate. Since then we have had nothing but trouble with them giving the insurance company wrong medical information, not forwarding documents, changing prices of premiums etc etc etc. Nothing short of a complete nightmare. So after 2 years of living in the house with no life insurance we are really fed up and just want to arrange our insurance elsewhere. Is this agreement that we signed legally enforceable? They are threatening to take us to court for this money.

We'd be really grateful for any advice

nickmack

saverstacey wrote: »

The mortage broker then began sending letters asking for a payment of £4000 ish to cover their lost comission in accordance with the agreement we signed. We asked them to provide an alternative policy, without critical illness cover, and at a competitive rate. Since then we have had nothing but trouble with them giving the insurance company wrong medical information, not forwarding documents, changing prices of premiums etc etc etc. Nothing short of a complete nightmare. So after 2 years of living in the house with no life insurance we are really fed up and just want to arrange our insurance elsewhere. Is this agreement that we signed legally enforceable? They are threatening to take us to court for this money.

I suspect (although I'm not legally qualified) that they cannot force you to pay 'lost commission'.

What does the contract say exactly with regard to this about cancellations?

saverstacey

Its termed a 'fee agreement' and says that we 'agree to pay 2% of the amount borrowed immediately on completion of the mortgage, usbject to provisions of clause 3 below'

clause 3 states 'the applicant shall not be obliged to pay the 2% fee if' the broker 'receive commission in respect of the insurance policy in a sum at least equivilant to the 2% fee.'

It then goes on 'in the event of cancellation of the policy the 2% fee shall immediately become payable. This liability remains for up to 4 years from the inception of the policy.'

dunstonh

http://forums.moneysavingexpert.com/showthread.html?t=395964

http://forums.moneysavingexpert.com/showthread.html?t=395550

Take a look at those two threads.

saverstacey

Hmmm, not really sure I completely understand, but I think it sounds like because we have signed a fee agreement then we are liable for the £4000?

dunstonh

If you signed a fee agreement, then the fee agreement must specify an amount. The 2% is greedy but you did sign it. It is when no fee agreement is signed that it is not enforceable.

However, the mortgage would cover some of that 2% and clawback on commission is not 100%. it is pro rata. So, the clawback after two years may not even happen (Bright Grey for example have a two year clawback period whilst some others have a four years). The amount you have to pay at most would be the amount clawed back. Not £4000.

Another possibility to get out of it, is to look at the initial disclosure documents (key facts about our services). Clawback liability has to be disclosed on this document. Failure to do so could breach the FSA's Treating Customers Fairly rules which are enforced by the Financial Ombudsman Service if the firm and yourselves cannot agree a satisfactory outcome.