A Sydney-based mortgage broking industry veteran has lashed out at mortgage insurer Genworth, calling a recent decision to increase insurance premiums in certain market segments is nothing short of ‘gouging’.
Smartline franchise holder Kevin Lee says he received the following notification from Genworth earlier this year:
“Please be aware effective April 1stGENWORTH Mortgage Insurance have increased their Lenders Mortgage Insurance (LMI) premiums as well as adding a loading for self-employed clients and if the security is for an investment property. This loading is also applicable if the borrower or guarantor is a self employed.”
“Once again,” says Lee, “mortgage insurers are playing games with the Australian public. US-based Genworth (part of the wider GE Group) is one of the world’s largest mortgage insurers and a very profitable company. To me, this has zip to do with the underlying strengths or weaknesses within the Australian economy; this is about gouging.”
Lee tells Australian Broker that Genworth have ‘never been shy’ in increasing their premiums to suit themselves and argues that finding out what insurance premiums are made up of is near impossible.
“I’ve seen mortgage insurance premiums in excess of $10,000 many, many times – sometimes in excess of $20,000. It’s not a cheap thing and no one can clarify how and why the premium is loaded. Nobody ever gets the inside information on how that happens.”
Genworth chief commercial officer, Bridget Sakr, confirmed that the insurer recently increased its pricing, but asked that the exact figures not be quoted due to the complexity of the pricing system.
“We price over a long-run cycle; we look at the next ten years. We have data going back to 1965 and we look at how things perform over different market indicators. Yes, we have increased our pricing using data looking back and self-employed borrowers are a segment that we have priced accordingly.”
Sakr says she wants brokers to realise that LMI premiums are capitalised on to the loan.
“At the same time, mortgage insurance plays a role so a client is able to buy a home sooner. In actual fact you’re looking at a cup of coffee a day. When you look at other insurances out there, your TV bill is more expensive than that. People go on about the prices going up, but we’re pricing for cycles where we’ve seen extreme deterioration. They need to put it in perspective –
But Lee isn’t convinced.
“Last time I checked, there were 1,060,000 small business in Australia – so are we saying that most of the Australian business sector is a risk? And if so, how did they come up with that calculation? I think this is a real slap in the face for Australia from an American company because they can get away with it.”