Consumers get wise to over priced payment protection insurance
- 11TH MAY 2007
Consumers are finally getting wise to the payment protection insurance (PPI) ‘racket’ and are actively seeking out standalone providers rather than go with their bank or mortgage lender.
The £6bn industry has for a long been a great money making machine for banks and lenders, with huge profits being made out of people protecting their financial future, but at last, there seems to be a backlash against buying payment protection insurance from the ‘traditional’ lenders.
Payment protection insurance is a policy that can be taken out to protect the repayments on loans, credit cards and mortgages should the policyholder become unable to work due to prolonged sickness, accident or unforeseen unemployment.
However, the benefits of the cover have been over shadowed by the widespread mis-selling of the product. Many customers have already successfully claimed compensation from their provider and it is expected that the compensation claims could run in to millions.
Policyholders have often been coerced in to buying the cover from their high street bank or lender at the time that they take out the credit or borrowing, unaware that they can often get a cheaper deal – and with better cover – by going to standalone provider.
But it seems that the very public profile of the sector is finally making a difference to consumers who are choosing to purchase cover independently.
In March last year, 60 year old Graham Rosamond was persuaded to take out payment protection insurance cover by Lloyds TSB when he took out a three-year loan for £7,000
However, once he researched the market place thoroughly, away from the high pressured bank offices, he was shocked to discover that cost would add more than £3,000 to the loan!
Graham immediately cancelled the policy (which was within the agreed period) and shopped around for cheaper cover.
He eventually found a policy costing him just £300 in total, from independent payment protection insurance specialists British Insurance. He says: “I have got the same cover, but at a tenth of the price of the Lloyds TSB cover.”
Talking to the This Is Money website, Graham added: “I could not believe how much the payment protection insurance cost. I thought it was steep, but when I queried this with the bank they said it reflected the risk.”
Hopefully, now more people will follow Graham’s lead and start shopping around for their cover.
