what are the impacts for the borrower and the market players ?, News / Opinion of Real Estate Expert

Entered into force on June 1, 2022, the Lemoine law profoundly reformed the real estate loan insurance market. A major breakthrough for consumer rights, this new regulation also has setbacks: an increase in tariffs and an appreciation of evolving risk.

Borrower insurance change at any time

As of June 1, any new borrower can terminate their home loan insurance at any time upon signing the loan offer. The scheme will apply to contracts in force from 1 September.

Claimed for years by consumer associations and insurers, this strong measure is a significant source of savings for borrowers. Often forced to take out bank insurance to get their financing on time, they regain purchasing power by substituting the up-to-date contract for an offer up to three times cheaper than equivalent guarantees.

By facilitating termination, the legislature opens up new perspectives for alternatives by easing the banking monopoly on borrower insurance. Already alive, competition between various actors will intensify for the benefit of consumers.

Deletion of the health questionnaire: threat to rates

La loi Lemoine introduced at the end of the medical selection for loans of less than 200,000 euros reimbursed before the age of 60 by the borrower, an inclusive measure for people affected by the disease. Prior to this law, the medical questionnaire generated strong discrimination related to the health history of patients and former patients, which resulted in significant additional costs, exclusions of guarantees and even denials of insurance.

Without any health data on this segment to support their pricing, insurers are forced to pool risks, to the detriment of young, healthy profiles who usually pay the least for their loan insurance. We move from one discrimination to another under the guise of an otherwise laudable inclusion effort. Professionals are talking about a 5% to 20% rate increase, which penalizes young assets that are often lower-income than other borrowers.

The subscription form will no doubt evolve to include data once provided in the health questionnaire: smoking and the practice of a dangerous sport. Occupational risks are other major data, such as travel. For example, those who smoke and drive a lot will pay dearly for their insurance if they do not have to fill out a health questionnaire.

What was presented as a measure of purchasing power is likely to be counterproductive due to hyper-mutualization far from being favorable to the greatest number.

Right to be forgotten: beware of workarounds

Third flagship measure of the Lemoine Act, the minimum time to benefit from the right to be forgotten increases from 10 to 5 years, and concerns former patients with cancer, and now people cured of hepatitis C. After this period , eligible borrowers do not have to declare their past pathology in the health questionnaire.

Les anciens malades can access the property today without having a often dissuasive deadline to complete a real estate project. If it welcomes the measure, the Cancer League is calling on the government to be vigilant in enforcing the law. She fears attempts to circumvent the disappearance of the health questionnaire in the context of loans of less than 200,000 euros, the term of which comes before the borrower’s 60th birthday and the non-declaration of cancer or hepatitis C. .

Underwriting insurance could thus be conditional on the award of a pension contract subject to a medical questionnaire, or active guarantees after a long period of care.

Let us add that banks maintain the assessment of medical risk indirectly through the study of income, which includes, among other things, mutual premiums, daily sick leave benefits or long-term sick leave.

Since June 1, at Magnolia.fr we have been processing three times more applications for loan insurance replacement, a sign that borrowers have understood the financial issue of the Lemoine law. Volume should explode from September 1 with the generalization of termination at any time.

In the meantime, the strategies put in place by banks to prevent bleeding should be questioned. The reforms provided des sanctions all up to 15,000 euros for institutions in violation of the rules. The past has shown that they are never enforced in the face of the powerful banking lobby.

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