On our blog we have already discussed several times the role banks play in insurance mediation. Today we echo a news item published in Cinco Días, written by Miguel Moreno Mendieta, about how expensive it can be to take out life insurance through a bank when arranging a mortgage.
Read the article at cincodias.elpais.com:
https://cincodias.elpais.com/cincodias/2022/09/07/companias/1662561209_830472.html
Article summary:
Banks Offset Cheap Mortgages with Expensive Insurance
The life insurance market suffers from a lack of transparency. A large part of this business is controlled by banks, which link this product to cheaper mortgages. However, policies are often inflated. According to a study carried out by Inese Data and the independent consultancy Global Actuarial, the cost of taking out insurance with a financial institution is almost double the cost of arranging it directly with an insurer. In the most extreme cases, policies can be four times more expensive.
The analysis was carried out using the “mystery shopper” technique, by visiting a bank branch or insurance agency to request a price. Quotes were requested from all the major banks, including Santander, CaixaBank, BBVA, Ibercaja and Bankinter, as well as 19 insurers such as AXA, Allianz, Caser and Mapfre. The fieldwork was carried out in June 2022.
According to the study data, the average premium for annual renewable term life insurance, with death and permanent disability cover, for sums insured of EUR 30,000 and profiles aged 35, 40, 45 and 50, stood in 2022 at an average of EUR 115.91. The striking point is the large difference between the price offered by banks, EUR 191, and that offered by insurers, EUR 100.
For the same profiles and covers, but with sums insured of EUR 120,000, the sector average rises to EUR 419.50, with notable differences again between banks, EUR 691, and insurers, EUR 362.
Although policies may differ slightly in the covers offered, life insurance is a highly standardised product, which sits uneasily with such large price differences.
A veteran executive in the insurance sector explains that banks very often use life insurance to offset the discounts they include when marketing mortgages if the customer agrees to a certain level of linkage.
Insurance broker associations have repeatedly denounced that banks are not transparent with their customers because they do not properly inform them that they are not legally obliged to take out life insurance with the bank when arranging a mortgage.
Of the 24 firms analysed, the two most expensive options for taking out life insurance with a sum insured of EUR 30,000 are Ibercaja, EUR 217, and Santander, EUR 193, compared with EUR 55 with Asisa. For EUR 120,000, the most expensive option is again Ibercaja, at EUR 821, while with Asisa it would be only EUR 221. In other words, with banks the price can be four times higher than the cheapest option.
These calculations are averages for different ages.
Financial sources consulted say that the comparison is not fully adjusted, because banking customers receive other types of compensation in exchange for paying a more expensive life policy, which they would not receive if they arranged it directly with an insurer.