January 1, 2018 is a date to mark a milestone for the mortgage insurance market. It is indeed from next year that households will be able to cancel their borrower insurance on the anniversary date of the contract. And according to the broker Renzo, savings prospects are promising for the insured.
Termination, anniversary date, comparison: what are we talking about?
Flashback. Last March, the Barquilla amendment was voted, paving the way for the annual cancellation of credit insurance contracts. Before this date, the insured could change insurance until 1 year after signing the mortgage (Hamon law, 2014).
These two provisions complement the Lagarde law, voted in 2010, and allowing households to take out loan insurance other than the one offered by their bank (we speak of delegation of insurance).
Why were these measures adopted? These 3 provisions are intended to favor the comparison of insurers so that borrowers get cheaper rates. Because loan insurance has a weight that is not negligible: it is the second cost item in real estate financing, just after interest. Insurance offered by banks is on average 25% higher than insurers offering insurance delegation.
When to use insurance delegation?
In summary, there are 3 possibilities for borrowers to compare loan insurance:
- at the time of the negotiation of the mortgage loan (Lagarde law);
- up to 1 year after the signing of the mortgage (Hamon law);
- on each anniversary date of the insurance contract (Barquilla amendment).
What consequences for borrowers and banks?
The annual termination may well change the situation. Currently in a situation of virtual monopoly (90% market share), banks could lose up to 450,000 borrowers, or 8% of their customers.
In terms of possible savings for borrowers, the study expects a pittance of 2.8 billion euros. And it is a low estimate.
How will the banks react?
To this question, reassure me outlines a scenario. According to the broker, the banks should initially be wait-and-see and watch how the market evolves. “Evolution”, precisely, would result in a significant loss of market share for 2 or 3 years.
They will have to find a solution to restore their margins. This could involve more advantageous insurance or a… rise in property rates.
How to compare mortgage insurance?
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