Invalidated by the Institutional Council a few months ago, it seems that this time, we can finally witness a modification of the regulations on loan insurance. Indeed, despite the powerful lobbying carried out by banking establishments, the Senate validated the modification of loan insurance contracts. France is in a very special situation where banking establishments take advantage of their position to impose their group contracts which are often much more expensive with equivalent guarantees than insurers’ contracts. Without ever writing it down, the group contract is strongly recommended.
It is indeed a big source of remuneration for banks
Which seek to recover the shortfall made on current home loans . Indeed, between extremely low rates and the capping of bank charges, bank profits are plummeting.
Historical insurers have been waiting for several years for this decision which will open up a market which is today not very competitive but which represents significant sums in terms of commissions. But do not believe that only insurers will be the winners of this decision. It is above all a victory for the consumer. Some insurers have estimated the gain for the latter at more than 50% on the cost of insurance. On a loan of $ 150,000 over 20 years, this still represents the amount of $ 12,000 in savings .
How will it actually work?
The insured will be able to change the borrower’s insurance contract on the condition of offering a solution that provides the bank with the same guarantees. Thus, if the borrower is insured for death, total and irreversible loss of autonomy, incapacity for work and invalidity of work by his bank, he will be obliged to provide at least the same type of guarantee if he wishes to change. To be able to validate this change, the bank will have to authorize it and it may be that in certain establishments, there is a certain resistance to this change. In this case it is advisable to contact a consumer association that can quickly assist the insured in the process. The legislator will be responsible for enforcing the law.
This new regulation is a great step forward in the defense of the consumer. It will open up this loan insurance market to new players. But there are still many areas where banking institutions are taking advantage of their monopoly. It will be difficult to verify that the banks leave their customers free choice. They often claim that, for the sake of speed or reactivity, if the client validates their group insurance, the loan offer will be published more quickly.