Securimut’s 2021 Annual Loan Insurance Survey provides a snapshot of the market before switching to Lemoine Act loan insurance termination at any time. By looking at the obstacles to changing insurance that the comparator has identified, it is easy to deduce what the law has the power to change and its blind spots.
As a reminder, replacement at any time with equivalent guarantees or infra-annual termination (RIA) replaced the Hamon Act, which allowed substitution in the first year of the credit and the right to terminate on the anniversary of the Bourquin amendment. The Lagarde law exists, which theoretically allows you to choose your loan insurance when you take out a loan. Theoretically, because extortion of loan insurance to guarantee credit conditions and bad information about the free choice of insurance are banking practices that are regularly pointed out by alternative insurance companies.
An application of the Lagarde unit in decline
In reality, the delegation of insurance at the time of credit has been in Securimut’s production in constant decline for 10 and today concerns only 45% of policyholders. “With each new law, banks have organized to reduce leakage from their portfolios.tackle Emilie Ruben, spokesperson for Securimut. In addition, the very low interest rates of recent years have further complicated this issue. The banks have put even more pressure on borrowers to take out their own creditor insurance. This was also highlighted in the recent Eiopa report and by brokers who condemned the quotas imposed on them in recent years.”
Borrowers using the Lagarde system have a very specific profile (see table). They are mostly managers, borrow more capital over a shorter period, less often for their main residence. Good files on which the banks are ready to make concessions. “Borrowers who have been advised against taking out alternative insurance to get their loan offer use the Hamon system to change it quickly afterwards and thus optimize their credit as well as possible”, adds Emilie Ruben. Now to see if these “second-class” profiles will change insurance within the same time limits as those imposed by the Hamon Act, or if the compensations will be spread out over time.
The Blind Spots of the Lemoine Law
One of the biggest obstacles to changing the insurance concerned precisely the time limits imposed by the previous devices – swept away by the Lemoine law – which allowed the banks to play for time. In 2021, Securimut observed that a third of requests did not receive a response within the legal deadlines, with a sixth of borrowers even waiting for a response for at least 30 days. Less than half (41%) of compensation requests received a single, complete response. By eliminating the time limits on the private side but mandating a 10-day response time on the bank side, the Lemoine Act should help to solve this problem, although the weakness of the penalties will not really encourage companies to stop withdrawing feet. .
Not everything will be rosy in the world of loan insurance. Other delaying maneuvers exist and do not fall within the scope of the law, such as the assessment in bad faith of the equivalence of the guarantees when approving the contract amendment or failure to respect the substitution mandate entrusted to the intermediary. Once the substitution has been accepted, it also happens that the borrower finds himself in a situation of double debiting because the bank has unilaterally changed the effective date of the new contract or issued the change to the loan offer too late (necessary for the substitution to take effect). “The Lemoine Act should improve these problems, as it requires that the modification be issued simultaneously with the agreement on the compensation (10 days from the receipt of the request) and prohibits any modification of the creditsays Emilie Ruben. But since the response deadlines are still too little met, we fear that the deadlines for issuing the amendment proposal will no longer be met.
In addition to its study, Securimut makes three proposals to improve the effectiveness of substitution:
– Put an end to the mandatory bank endorsement at the time of substitution. “This endorsement does not provide the borrower with any additional information about the insurance he has already taken out and about the APR [taux annuel effectif global NDLR] “recalculated” in this supplement, it is not comparable to the original APR of the credit and therefore does not provide any relevant information”loading the document.
– Clean the APR of insurance completely by integrating it into the effective annual insurance rate (TAEA) to avoid games with communicating vases obscuring the information for the buyer (some operators include part of the insurance cost under the APR)
– Integrate the standardized information sheet (FSI) detailing the termination requirements into the contractual and non-pre-contractual documents of the loan offer to ensure that the borrower retains it for the duration of the loan
Parliamentary Review of the Lemoine Act
The National Assembly’s Finance Committee prepared an application report on the law on “creditor insurance” of 28 February 2022. The deputies consider the application of RIA to be satisfactory: banks as alternative insurance companies have “Almost systematically and without notable exception, correctly introduced the procedures and technological adaptations necessary for the application of the law”, they write. On the front, they lament that 75% of the alternatives have raised their prices – from 20% to 25% according to Bercy estimates – for loans affected by the removal of the health questionnaire. The rapporteurs fear that this increase in premiums will lead to “a segmentation of the market to the detriment of the younger generations, where the loan must be repaid on the insured’s 60th birthday.”