Mortgage Broker Hard Selling Insurance

PJS_12345

My partner and I are in the process of buying a flat and it has all been going smoothly until it came to the discussion of various types of insurance with our Mortgage Broker. They got us both on a call, after having indicated that it was a formality relating to the mortgage we are in the process of obtaining, and then blindsided us with a long list of questions. After a while it became obvious that it was a 'cross-selling' exercise and that they were going to go away and get us insurance deals.

I'm not necessarily against having some or one of, income-protection, life insurance or critical-illness insurance, but our jobs give us more than decent cover in most of these areas and the prices our broker has quoted us seem exorbitant, (especially in comparison to what our friends and family pay). 

We tried to politely say that we are unsure and want to step away and think about cover, whilst obviously proceeding with the mortgage they've brokered for us, (which we are happy with), but they become pushy and aggressive and in their communication heavily implied that we wont be able to proceed with our mortgage unless we engage them in this exercise. 

The terminology that they keeping coming back to is that they need to 'sign off the mortgage as affordable with the Financial Conduct Authority', and that wont be able to do that unless we take out these types of insurance. 

So my question is less about the merits of getting these types of insurance and more: is what they are hinting at correct? From searching the internet, I don't believe that it is. It seems as though the only type of insurance that a mortgage is contingent upon is buildings insurance, and we will have that. Also the fact that they stop short of outright saying that we wont be able to get our mortgage without the insurance through them, leads me to believe that they are just trying to pull the wool over our eyes. 

Like I said, I'm not against getting any of these insurances, per se, I just don't think the prices we've been quoted are competitive and I don't like the pressure that our mortgage broker is putting us under, so even if we do purchase any of this cover, I don't want it to be through them as they've treated us badly. If we outright refuse to take them up on their offer to broker this insurance, could we potentially be creating a problem for ourselves in the mortgage itself going through? 

K_S

@pjs_12345 I'm sorry you had this experience but I can categorically state that there is no requirement for you to take out protection along with a mortgage. As far as the lender is concerned, having protection or not will not impact your mortgage application outcome.

I sleep better having life, cic and IP and often come across clients would do well to get one or more types of cover. Once it's close to exchange, I drop an email to the client offering to discuss protection. In some cases clients will say no thanks, in others they will be happy to discuss it, sometimes after reviewing their existing cover they are adequately covered through work except perhaps requiring a top up life-cover and in some cases they will never have thought they needed protection until I've had the conversation.

But this kind of hard-sell is poor practice and frankly it doesn't really work anyway. All that will happen is that clients who succumb to hard-sell by implicitly linking it to a mortgage will go ahead and cancel the policy soon after completion.

ACG

I only have income protection, I have been meaning to sort out life insurance since my daughter was born (she is 4 now!). 

There is no requirement to have any insurance bar buildings insurance. 
To be honest, the fact they have become pushy would make me not want to take out insurance through them anyway, yuo need to be sure they are doing the best thing and whilst recommending insurance is generally the best thing, I would wonder whose interests they have at heart.

As for the price others pay, it is difficult to compare:
The biggest factors for all of these policies are:
Age when taking out the policy - if you are 40 and your friends were 35, you will notice there is a jump. 
Health issues.
Amount of cover - clearly £100k of cover will cost less than £200k. 
Term of the policy. My income protection policy is due to finish at 55. I did that in part to keep the cost down. My mortgage will be cleared off by then, so I did not need a policy to go beyond then as I also have a couple of pensions. 
And in terms of income protection, your occupation plays a part. A nurse/teacher or manual job are usually higher risks than a mortgage broker. 

So it is difficult to compare costs. That being said, some brokers have what are known as loaded premiums, but I think that is quite rare. 

london21

Be firm and inform them that you would not need the insurance due to your employment cover.

Some can push for it for their commission.

Haven worked for Lloyds few years back on PPI claims. So many people were sold insurance they did not need.

chanz4

Remind them of fsa treating people fairly and that you wish to source your own insurance. They get a huge kickback

PJS_12345

Thanks all for your advice. 

Just had a call with them where we tried to tell them that we do not wish to take out any insurance protection from them and it went really badly. They explicitly said that they will not proceed with the Mortgage that they have sourced for us unless we take out protection with them (we have an agreement in principle and the mortgage company is currently valuing the property). This obviously contradicts what @K_S has stated. They kept saying that they are not 'execution only', and as such we are obliged to take protection with them, (I do not believe this was made clear at the beginning of our dealings with them). They keep wrong-footing us with reference to the FSA and terminology which sounds quite technical, that we cannot contradict.

The way we have left it with them is that they will speak to their 'Compliance Officer' and come back to us to see whether or not they can proceed.

I just cant understand why there is such a disjoint between the advice here (and what I've read elsewhere), which is that we are within our rights to say no, and the fact that they are willing to scupper us getting our Mortgage for the sake of whatever their commission is.

Just a side note: Its not the principle of the insurance (I do believe we will get some), I just am opposed to how they've gone about selling it to us. 

kingstreet

FCA not FSA.

Did you accept terms which included buying protection in lieu of paying a fee for mortgage advice?

K_S

@PJS_12345 I have worked for and with multiple broker-firms and I can only repeat what I've said in my post above.

If I had to guess, the broker will come back saying you're fine to proceed as long as you can confirm that you don't need protection (or something to that effect).

Unless there's more to it as kingstreet asks above, I doubt they'd let go of your mortgage business for this issue. And the order of things doesn't make any sense anyway, given that it looks like they've already submitted a full app on your behalf (you mention that a valuation is taking place) which happens after the advice bit.

PJS_12345

kingstreet said:

FCA not FSA.

Did you accept terms which included buying protection in lieu of paying a fee for mortgage advice?

No, not at all! 

K_S said:

@PJS_12345 I have worked for and with multiple broker-firms and I can only repeat what I've said in my post above.

If I had to guess, the broker will come back saying you're fine to proceed as long as you can confirm that you don't need protection (or something to that effect).

Unless there's more to it as kingstreet asks above, I doubt they'd let go of your mortgage business for this issue. And the order of things doesn't make any sense anyway, given that it looks like they've already submitted a full app on your behalf (you mention that a valuation is taking place) which happens after the advice bit.

That's interesting that the order of things don't make sense. We actually already had one fall down on a valuation, so this is the second time they progressed a mortgage to this stage for us and the insurance was only brought up after the second full app was submitted. 

ACG

Some brokers will waive their fee if you take out insurance - but that is not an FCA requirement. But they should be making you aware of it and you should be agreeing to it before proceeding. It sounds like that has not happened. 

There is no FCA requirement what so ever to have any insurance. 

Ask them to put what they are saying in writing so that you can run it by the financial ombudsman. 

csgohan4

Sounds like a broker I would be avoiding in future. Was it via the EA, if it was, I am not surprised.

I would take your business elsewhere if they do not back down.