By the end of this month some of the country s largest high street banks will cease selling single premium Payment Protection Insurance known as PPI because of continuing pressure from the City Regulator. Payment Protection Insurance is generally sold to cover repayments on unsecured loans, such as credit cards in the event of unemployment.
The Financial Services Authority said it sees the need for appropriate protection insurance in the present economic environment. But added that it was seriously concerned about the sale of single premium Payment Protection Insurance, where the price of the insurance frequently thousands of pounds is added to the loan and then interest charged on this amount. The managing director of retail markets with the Financial Services Authority said they were pleased these Banks have stopped selling single premium policies, and that they hope other firms would review their positions.
So long as PPI policies are sold appropriately they can be helpful to customers wanting protection on a specific credit agreement. The FSA said that some of these banks, along with other firms, now intend to offer regular premium PPI instead of selling single premium Payment Protection Insurance alongside unsecured loans.
The managing director of retail markets with the FSA said that customers being sold this type if insurance should be told how the insurance works, what it covers and also what it costs. Tackling inappropriate Payment Protection Insurance sales is a priority for the Financial Services Authority. After the market had not fully responded to its cry to comply with sales standards the FSA said it would be escalating its regulatory intervention. A large building society has been fined a record seven million pounds for serious failings in its telephone PPI sales and the FSA has taken action against a further 20 firms for miss selling PPI.
The head of technical services at the British Insurance Brokers Association said: It s an important step towards providers accepting that single premium PPI is bad value for the customer. We are of the opinion that single premium PPI policies should be prohibited and recommend the rest of the market to follow suit. We are in agreement with the FSA s concerns about adding the PPI premium and the loan together because it attracts higher rates and we feel this should be banned. The FSA made this announcement as consumer groups stepped up efforts to claim compensation for victims of Payment protection insurance miss selling.
Which, the consumer advice magazine has launched Payback , a derivative of Facebook, the social internet site, designed to highlight awareness of payment protection insurance among graduates and professionals who may have been miss sold a policy when acquiring an unsecured loans or credit card.
In reply, the Association of British Insurers said people should think carefully before doing something that would leave them without unemployment protection in this present economic climate. The Association of British Insurers believes that PPI is an extremely valuable product, if sold properly. During 2008 unemployment claims on payment protection insurance policies soared by 113 per cent compared to the year before. This appears to be a fashion that will continue.
When they take out a PPI policy the customer needs to understand what it costs and what it covers. The Association of British Insurers and its member companies have been working with the regulator to ensure this happens, so that they can make an informed choice.
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