The price, quality and distribution of mortgage payment protection insurance: A hedonic pricing approach

John Ashton () and Robert Hudson

No 11010, Working Papers from Bangor Business School, Prifysgol Bangor University (Cymru / Wales)

Abstract: Mortgage payment protection insurance (hereafter MPPI) provides varying combinations of accident, sickness and unemployment insurance and is used to protect the mortgage payments of policyholders in the event of a fall in income. Recently the provision of this service in the UK has been heavily criticised for providing poor value for money and for being associated with unhelpful sales techniques especially when sold jointly with a mortgage. Consequently in 2009 the Competition Commission ruled that MPPI should not be sold jointly with lending. In this study we examine whether this prohibition was justified and specifically does the form of distribution, either jointly with the mortgage or independently influence the premium levels. This research question is examined using a hedonic pricing approach with details and premiums of 281 MPPI policies. We conclude that the premiums of policies sold independently are lower than those policies distributed jointly for a given set of benefits and conditions. These findings support to the prohibition of the joint sale of the MPPI with mortgages.

Keywords: Mortgage Payment Protection Insurance; Mortgage Credit Insurance; Insurance premium setting; joint pricing. (search for similar items in EconPapers)
JEL-codes: G21 (search for similar items in EconPapers)
Date: 2011-11
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The price, quality and distribution of mortgage payment protection insurance: A hedonic pricing approach (2017)
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