Equivalence of guarantees: a prerequisite for changing loan insurance.

Legislation has paved the way for mobility in loan insurance, but competition between banks and insurers is based on one crucial element: the equivalence of guarantees. If this condition is met, the change in borrower insurance is only a matter of timing.

Competition established since 2010

Competition established since 2010

Since 2010, the Lagarde law allows a borrower not to blindly choose the group contract offered by his bank to insure his home loan. It can in fact bring competition into play by favoring the individual contract of an insurer. This is called delegation insurance. This legislative provision aims to reduce the cost of borrower insurance, and it was reinforced in 2014 by the Hamon law and then in 2018 by the Bourquin amendment to the Sapin 2 law.

But what remained unchanged was the condition of the equivalence of the guarantees registered in article L, 312-9 of the Lagarde law. It authorizes the lending institution to refuse a request for delegation of insurance if the individual contract offered by the organization does not have a level of guarantee equivalent to that of the group contract.

The limiting list as a reference

The limiting list as a reference

The equivalence of guarantees is not judged at the whim of the lending institution: it is based on a restrictive list of 26 criteria decreed by the Advisory Committee on the Financial Sector (CCSF). There are 18 for borrower guarantees and 8 for the optional loss of employment guarantee. Among these criteria, the lending institution is entitled to demand 11 on DC, PTIA, ITT, IPT and IPP guarantees. And in the event that he demands the loss of employment guarantee (PE), he can demand equivalence on 4 criteria.

Several shooting windows for the borrower

Several shooting windows for the borrower

The required criteria must appear on the standardized information sheet (FSI), a document that can be used by the borrower to bring competition into play. The insurer who wishes to make a contract proposal will then only have to match the criteria required. This can be done at the time of signing the loan contract, but also at any time during the twelve months that follow as well as on each anniversary date of the mortgage.

Loan insurance: a bill to better inform the borrower.

Martial Bourquin is intimately linked to borrower insurance, more specifically to the delegation of insurance because of the amendment to which he gave his name. Senator du Doubs is still defending a bill to promote the free choice of loan insurance, at a time when 87% of contracts are group insurance.

Loan insurance is far from trivial

Loan insurance is far from trivial

Loan insurance is the guarantee both for the bank and the borrower that the maturities of the mortgage will be honored until the end of the contract in the event of a claim (death, disability, etc.) For this, the banks offer a group contract identical to all the underwriters in order to pool risks, which can sometimes represent a third of the total cost of real estate financing. Since the Lagarde law of 2010, it is possible to take out individual loan insurance, in order to benefit from tailor-made guarantees and thus lower the cost. The Hamon law in 2014 authorized the loan insurance change at any time during the first twelve months, and the amendment Bourquin extended this possibility since 1 January 2018.

The Bourquin amendment, continuous competition

The Bourquin amendment, brought by the socialist senator and integrated into the Sapin 2 law of February 17, 2017, offers the possibility for the borrower to change to another insurance contract on the anniversary date of the signing of the mortgage contract. To be accepted by the bank, the new guarantees must offer protection similar to the group contract.

However, despite this amendment, the termination of the group contract remains little used. The advantage obtained since the 2017 law is the reduction in the tariffs applied. The senator nevertheless remains mobilized on this issue.

Clearer termination date

Clearer termination date

Re-elected to the Senate on September 24, 2017, Senator Martial Bourquin has prepared a bill “to speed up and simplify public action” which plans to improve the information given to individuals because he says it lacks readability. For this, the banks will have the obligation to enter the date of signature of the loan offer on the insurance contract and the notice in order to be used as a possible termination date.

Otherwise, the borrower may terminate his insurance at any time. In addition, they must send a standardized form free of charge summarizing the offer to the borrower within 10 days after the agreement of the mortgage. Finally, they will send every year, well before the anniversary of the contract, a reminder of the right of termination. A fine of $ 15,000 is notably provided for in the event of non-compliance with the law. This project will be voted on in April.