Research Working Paper · MWP-2026-02
The Bank Premium
Tied bancassurance distribution and mortgage-protection pricing in Ireland
Donal Milmo-Penny, QFA FLIA · Research Lead, mylife.ie · May 2026
Download PDF (MWP-2026-02)Abstract
Irish pillar lenders distribute mortgage protection through single tied life offices. Whole-of-market quotation reveals a typical premium gap of 20 to 30 per cent. We estimate the cumulative household cost and situate the finding within international evidence on bancassurance distribution.
Series
Mylife.ie Working Paper
Paper
MWP-2026-02
Published
May 2026
Author
Donal Milmo-Penny QFA FLIA
Key findings
20–30%
Typical bank premium gap
Cheapest whole-of-market vs pillar-bank tied quote for an identical risk
€28m
Annual cost to Irish households
Conservative estimate: 40% tied-channel share × €100 annual gap per affected household
€56m
Cumulative 30-year vintage cost
For a single year's drawdown vintage (46,358 mortgages, 2025 BPFI data)
Illustrative monthly premiums — representative borrower (April 2026)
Joint life, two non-smokers, age 35/35, €321,912 sum assured, 30-year decreasing term, standard rates. Source: mylife.ie quotation exercise.
| Provider type | Monthly premium | Annual premium | Gap to cheapest |
|---|---|---|---|
| Pillar-bank tied office (illustrative) | €38.50 | €462 | +27.5% |
| Mid-range whole-of-market quote | €33.10 | €397 | +9.5% |
| Cheapest whole-of-market quote | €30.20 | €362 | — |
Premiums are rounded to the nearest €0.10 and are illustrative of the representative borrower described in the paper. Individual quotations vary with age, sum assured, term, smoker status and underwriting outcome.
Why does the bank premium persist?
The paper identifies four mutually-reinforcing mechanisms, each extensively documented in the international literature:
Point-of-sale advantage
The lender presents a single quote at the moment of highest information asymmetry and lowest search capacity — mortgage drawdown. The borrower has little time, high transaction friction and an implicit default option.
Default and inertia bias
Behavioural-finance research (Madrian & Shea, 2001) shows defaults are sticky even when the alternative is materially superior. Exercising the Section 126(3) right requires sourcing a fresh quote, completing underwriting and supplying a deed of assignment.
Commission and intermediary incentives
Anagol, Cole & Sarkar (2017) found that commission-motivated agents recommended dominated products in 60–90% of audits. Inderst & Ottaviani (2012) show competition between intermediaries does not eliminate the distortion.
Information asymmetry on price and quality
Whole-of-market claims-acceptance rates cluster narrowly across providers (see mylife.ie Claims Report 2024). There is no material quality difference — only a price difference. Consumers transact at the highest-priced point despite no quality justification.
International context
The Irish case is not exceptional. The paper situates the findings within five strands of international evidence:
- EIOPA (2022) thematic review on credit-protection insurance sold via banks — found 83% of European banks tie the policy to the credit product; commissions frequently exceed 50% of premium.
- UK Competition Commission PPI inquiry (2009) — identified the same point-of-sale advantage mechanism; the resulting redress programme ultimately exceeded £38 billion.
- FCA general-insurance pricing practices review (2018–2022) — quantified a loyalty penalty of £1.2 billion per annum; imposed a remedy requiring renewal prices to match new-customer prices.
- FCA pure-protection market study MS24/1 (2025) — interim findings extend structural concerns to term assurance and income protection, products structurally identical to Irish mortgage protection.
- Australia — ASIC REP 256 (2011) and REP 622 (2019) found loss ratios as low as 19 cents per dollar; the Hayne Royal Commission (2019) recommended and implemented a deferred-sales model now in force.
Policy implications
Three responses are identified in ascending order of intrusiveness. Each has direct precedent in adjacent jurisdictions and could be implemented within the existing Irish regulatory architecture without primary legislative reform of Section 126.
Disclosure remedies
Require standardised disclosure at mortgage offer of the lender's tied insurer status, the borrower's right under Section 126(3), and an indicative range of whole-of-market premiums. Implementable within the Consumer Protection Code. Necessary first step but insufficient alone.
Conduct remedies — a deferred-sales model
Require a minimum interval between mortgage offer and policy binding, with a standardised whole-of-market comparison document provided to the consumer during the interval. Modelled on Australia's post-Hayne deferred-sales model. Estimated annual consumer benefit: €3–7 million at the stock level.
Structural remedies
Prohibit a mortgage lender or its wholly-owned subsidiary from selling mortgage protection at the point of drawdown. Equivalent in spirit to the UK Competition Commission's PPI prohibition. Available in principle but the paper does not advocate for it at this stage — disclosure and conduct remedies are likely to deliver the bulk of the benefit at lower regulatory cost.
Frequently asked questions
What is the bank premium on mortgage protection in Ireland?
The bank premium is the extra cost paid by borrowers who take mortgage protection from their lender's tied life office rather than sourcing it independently. Mylife.ie's April 2026 quotation exercise found a typical gap of 20 to 30 per cent — approximately €100 per year and €3,000 over a 30-year term for a representative borrower.
Do I have to take mortgage protection from my bank in Ireland?
No. Section 126(3) of the Consumer Credit Act 1995 expressly preserves your right to source mortgage protection from any insurer. Your lender cannot legally require you to use their tied life office. You are free to use a whole-of-market broker and assign the policy to your lender.
How much does the bank mortgage protection premium gap cost Irish households in total?
Under conservative assumptions — a 40 per cent tied-channel share and a €100 annual gap per affected household — the aggregate annual cost across the Irish mortgage stock is approximately €28 million per year. Sensitivities suggest a range of €35 to €50 million under sum-assured-weighted or higher tied-share assumptions.
Which Irish banks are tied to which life offices for mortgage protection?
As of April 2026: AIB and EBS (AIB Group) are tied to Irish Life; Permanent TSB is also tied to Irish Life; Bank of Ireland distributes through its wholly-owned subsidiary New Ireland Assurance. Each pillar lender presents a single quotation from a single insurer at the point of mortgage drawdown.
What is the cheapest mortgage protection premium compared to the bank quote?
For a joint-life couple aged 35, non-smokers, with a €321,912 sum assured over 30 years (the 2024 BPFI average first-time buyer mortgage), the cheapest whole-of-market premium was approximately €30.20 per month versus the illustrative pillar-bank premium of approximately €38.50 per month — a gap of around €8.30 per month.
What policy remedies does the paper recommend for the bank premium in Ireland?
The paper identifies three responses in ascending order of intrusiveness: (1) standardised disclosure at mortgage offer of the lender's tied status and an indicative whole-of-market premium range; (2) a deferred-sales model modelled on Australia's post-Hayne Royal Commission approach, requiring a minimum interval between mortgage offer and policy binding; (3) structural separation between mortgage origination and mortgage-protection distribution. The paper recommends the first two as proportionate first steps.
About the author
Donal Milmo-Penny QFA FLIA
Research Lead, mylife.ie
More than twenty years of experience in Irish financial services, protection and client advisory work. Qualified Financial Adviser (QFA) and Fellow of the Life Insurance Association (FLIA). Former Chairman of PIBA and Director of Brokers Ireland.
20+
Years experience
QFA FLIA
Qualifications
PIBA Chair
Former role
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MWP-2026-02 · 30 pages · 29 cited sources · JEL classification D14, D18, G22, G28, L13
This paper is published for information only and does not constitute regulated financial advice. Premium figures are illustrative of the representative borrower described in the paper; individual quotations vary with age, sum assured, term, smoker status and underwriting outcome. SMP Financial Ltd t/a mylife.ie is regulated by the Central Bank of Ireland (C42382). Registered office: 55 Ailesbury Road, Dublin 4, D04 F8C0. CRO: 315830.