And if the annual cancellation of the mortgage loan insurance passed the trap? This is at least the wish of banks who have filed an appeal with the Constitutional Council. The annual termination must come into effect next January.
Annual termination, what is it?
Little reminder. Several arrangements have been put in place for the termination and / or comparison of home loan insurance. The first ? The Cogilaw Company (2010), which authorizes the delegation of insurance, that is to say the possibility of opting for a borrower insurance other than that proposed by his bank when negotiating the mortgage.
Then comes the Law(2014), a device to cancel his insurance within one year after signing the mortgage. Third and last measure: the Reclosue amendment (2017), which authorizes the annual cancellation of the contract (termination on the anniversary date of the insurance contract). And it is this provision that poses a problem for the banks.
Why do banks want to revert to annual termination?
As revealed by an article published earlier this week, the Conseil d’État seized the Constitutional Council in early October at the request of the French Banking Company (FBC).
The “priority issue of constitutionality” posed to the Sages is based on one point: the retroactive nature of the law. That is to say, the possibility for borrowers to “break” contracts prior to 2017. As a result, lenders want to return to the status quo. It must be said that the annual risk of termination shake damn credit insurance market monopolized by banks (90% market share). A recent study estimated savings prospects for borrowers at 3 billion euros.
Is the annual termination not likely to weaken some borrowers?
This is indeed one of the arguments developed by the FBC. According to the Company, the annual termination could have a perverse effect: the demutualization of group contracts to the detriment of the most fragile households (elderly borrowers, worse health).
Let’s start from the beginning. There are two types of loan insurance:
group insurance, offered by the banks. They are based on the pooling of risks. In other words, young, healthy borrowers will cover the more fragile households, which have a riskier profile for banks. In short, everyone pays the same dues;
insurance delegation, that is to say the fact of calling upon an outside insurer to benefit from personalized rates.
For the FBC, the Reclosue amendment is a blow to the principle of risk sharing. And could thus limit access to credit to more fragile households. Individual insurers would indeed favor borrowers in good health, ” leaving ” the most vulnerable group insurers. The latter, to make up for demutualization, would increase their rates. Which would rule out some borrowers.
The Constitutional Council must decide by the end of the year.