Owners ‘save €6,300’ in mortgage cover ruling

Property owners could save thousands over the term of their mortgage

24 January 2018

The Conseil Constitutionnel has validated an amendment allowing property owners to find new mortgage insurance every year and retrospectively for current loans.

With loan insurance being about 30% of the credit cost – and with no real competition to bring down premiums – the move was fiercely contended by the Fédération Bancaire Française and eight major insurers.

The Assemblée Nationale, when debating the amendment, said it could mean €600 a year for borrowers and insurance broker Réassurez-moi said an average saving could be €6,300 per contract over millions of policies.

It added that if 8% of people renegotiated their insurance the savings in 2018 alone could reach €2.8bn – and, looking at the bigger picture, the Fédération Française de l’Assurance said the business could be worth €8.8billion a year.

Cancer patients and others with severe or chronic ailments could also get serious relief as those who took out onerous insurance at the time of buying can now take advantage of the “right to forget” droit à l’oubli where their condition has eased or gone into remission.

Seven insurance companies, Allianz France, Aviva France, Covéa, Macif, MACSF, MAIF and Swisslife France, applauded the Conseil Constit­utionnel ruling as a “major step forward for consumers”, saying it could “help the six million households who already have a mortgage and all those who want to buy in the future”.

They added they would work so that healthy competition would give each borrower the best insurance coverage at the best price, notably those with health complications.

Borrowers should now see increased competition and may see the end of policies which set a high premium at the start of the contract and maintain it over the term, rather than falling in line with the mortgage sum outstanding.

When buying a property, 88% of buyers take the ‘group’ insurance that is offered side by side with the loan by their lender to secure the mortgage, either not knowing that they have the free choice of insurer or simply wanting to get the loan approved without delay.

Antoine Fruchard, founder of Réassurez-moi, said for the last 20 years France’s nine major banks had imposed a system where insurance was mandatory for each mortgage – and where the banks scooped up almost all this business, worth €6billion of annual payments.

The profit margin was 40%-50% on the policies and he said the charges were completely out of line with the service borrowers received.

People who were not in good health found it particularly hard as they could face premiums 300% above the normal and no real competition. If a borrower could not find coverage the property purchase could not proceed.

Insurance policies must be cancelled within a set notice period and banks still have the right to refuse a policy if it does not match the guarantees of the previous one.

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