LMI premium increases a 'slap in the face,' says veteran broker

by Mackenzie McCarty08 Apr 2013

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 1st GENWORTH 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.

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  • by Regional broker 8/04/2013 11:24:17 AM

    When you have a duopoly in the Loan Mortgage market they dont compete with one another, just follow the lead of the other. LMI has been an area where the Banks wont complain as they pass the increase onto the client. Rather than having a broker market that is constantly under the microscope of the governing bodies, how about the consumer watch dog investigate into the actions/activites of the companies in the loan mortgage insurance market. They have had a free rdie for so long, now is the time to investigate their charges.!!

  • by David C 8/04/2013 11:26:09 AM

    I wonder if their data dating from 1965 shows that, historically, property values increase? This, coupled with reducing debt, means the "risk" they cover is reducing year by year.
    I don't know if they are aware that the premium being capitalised onto the loan is also charged interest, so customer is paying on top of actual premium amount.
    I understand that they have a vital place in the market but they need to justify their premium calculations.

  • by Chris Incogneto 8/04/2013 11:31:50 AM

    If you quote 1 cup of coffee per day over 10 years then a loan which is terminated in 5 years should get a 50% refund on the premuim?

    Furthermore why can't a borrower change lender whilst remaining insured with the same insurer without paying a second premium?

    The mortgage insurance industry is far more concentrated than the banking industry and is in much greater need of competition.