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Mortgages and life insurance

According to the Italian Consumer Code, banks are not allowed to tie life insurance to a mortgage credit. In other words, banks are not allowed to force consumers to buy the insurance at the bank which grants the mortgage credit.

However, a mystery shopping exercise by the Italian consumer association Altroconsumo in 2012 revealed that in 22% of cases mortgage borrowers were told they had to get life insurance as part of the mortgage. This practice frequently resulted in an increase in the premium for the loan that consumers were applying for, with customers on average paying €6,800 more to take out their loan.

The Italian insurance supervisor IVASS also carried out investigations on the distribution of payment protection insurance related to mortgages and personal loans for the years 2008 and 2011. It found that policies distributed by banks or financial intermediaries had higher commission rates (44% on average, with a maximum of 79%) than policies distributed by agents (20%).

The Italian insurance supervisor found in 2014 that insurance companies had paid out €679 million in fixed payments and commissions to distributors, equivalent to 44% of all the premiums. It found that in 10% of cases, the commission paid out for the sale of the product was equal or above 50% of the product’s premium.