Seán Fleming (Laois, Fianna Fail)
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122. To ask the Minister for Environment, Community and Local Government if mortgage protection insurance is required on all annuity loans from local authorities in respect of loans to purchase houses; the costs and guidelines relating to the cost of these insurance policies through the local authority, which can be three times more expensive than the equivalent mortgage protection available in the private sector; if persons who take out loans from local authorities have the opportunity of getting their mortgage protection insurance from another source as happens in the private sector; and if he will make a statement on the matter. [7873/16]

Alan Kelly (Tipperary, Labour)
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The legislation requiring that mortgage protection insurance is held by mortgage holders is contained in the Consumer Credit Act 1995. This legislation is the responsibility of my colleague the Minister for Jobs, Enterprise and Innovation.

The local authority mortgage protection insurance (MPI) scheme is overseen by the Mortgage Protection Committee which is a sub-committee of the County and City Management Association (CCMA) and is representative of the CCMA, local authorities, the Housing Finance Agency and my Department. One of the conditions of the scheme, which is a group policy, is that it is obligatory for all local authority borrowers who meet the eligibility criteria to join the scheme. Altering this condition would have a negative impact on the scheme and increase the cost for all existing borrowers. The current MPI premium is charged at 0.4703% of the outstanding capital loan balance as at 1 January each year. A local authority housing loan applicant who is not eligible for the local authority MPI scheme must source a suitable individual MPI policy from the market.

There are a number of differences between the local authority MPI scheme and standard MPI products available on the market. Standard MPI products are individually priced based on a member's age, amongst other factors, whereas the Local Authority MPI scheme is a group arrangement offering a single group rate per €1,000 sum assured to all participants in the scheme.

Aside from the difference between an individual and a group rate, the following factors are the main influences on the price of the Local Authority MPI scheme:

(i) standard mortality and morbidity factors based on population actuarial statistics;

(ii) the local authority borrowers’ risk profile;

(iii) the terms and conditions of the Local Authority MPI scheme and, in particular, the fact that all eligible local authority housing loan borrowers are accepted without medical evidence; and

(iv) the claims experience of the Local Authority MPI scheme.

The Local Authority MPI scheme also provides extra benefits, such as:

- mortgage repayments are paid if there is a valid claim as a result of disability;

- separate to life cover, an additional €3,000 is payable in the event of a member’s death; and

- members are covered for death up to age 75 whereas standard MPI cover usually ceases at the age of 65.

The Mortgage Protection Committee which oversees the scheme endeavours to achieve a balance between the most economic rate to be charged for the scheme and the benefits provided. In negotiating a renewal of the scheme, which came into effect from 1 January 2012, the Committee were able to harness the downward pressure on pricing in the economy and secure an average 19% reduction on the rate which applied to the previous scheme. As part of the upcoming re-tendering process, the Committee will seek to secure with effect from 1 January 2017, the most appropriate Mortgage Protection Insurance cover at the best value for money for local authority borrowers.