Several broker joined the fracas to discuss their own issues with bank-offered mortgage life insurance, with many criticizing the high mark-ups and low payouts.
“The markup on bank-issued MLI is 2,500 per cent to 4,000 per cent,” Lior Hershkovitz of Mortgage Edge wrote on MortgageBrokerNews.ca. “Mortgage life insurance is a cash-cow for financial institutions because the payout rate is ridiculously low.”
For some, the fact that banks don’t spend enough time explaining the details of how the insurance works is the biggest issue.
“Not saying insurance is a bad thing but clients are never properly informed. Insurance companies are very good at explaining what is covered, but hide the details on what is not covered,” Brad Currie of Verico Versa Mortgages wrote. “They always stack the deck in their favour.”
Talk soon turned to personal anecdotes, when one broker mentioned a client of his who may have been taken advantage of the bank because English wasn’t his first language.
“This Italian Immigrant struggled a little with the English language so he checked one question yes then scribbled it out and checked no,” Russ Robideau commented. “The bank's insurer ruled that since he had effectively answered yes and no the claim was denied. These insurance questions seem not to be well explained by bank mortgage staff and I'm not sure why.”
For his part, Hershkovitz believes the lack of oversight encourages lenders to hock this type of insurance so willingly.
“The lenders continue to collect the premium from the borrower fully knowing that in the vast majority of cases the claim will be rejected,” Hershkovitz wrote. “This type of insurance is not regulated and this is why it is pushed aggressively.”
Bank denies mortgage life insurance claim