Fairer refunds promises FSA
- 21ST MAY 2007
Payment protection insurance (PPI) has been in the spotlight recently regarding the unfair ways it is sold; the cost of the premiums when bought at from banks and high street lenders; and the fact that the majority of single premium policies included a nil-refund policy.
However after the Financial Services Authority’s latest phase of their investigation into the sector, it seems the public have won one battle, the right to claim a refund if they should cancel their single premium policy. The Financial Services Authority and the payment protection insurance trade unions have come to an agreement that they will be offering a fair refund to those who do cancel a policy.
Single premium policies tend to be taken out alongside loans, with the insurance premium being included in the overall loan cost and with interest added too. If someone pays off their loan early or their circumstances change and the policy is no longer needed, until now, they would not have been entitled to a refund of their premiums. In effect, where a loan is paid off early, the policyholder would be paying for insurance on something that does not exist.
For those consumers who have a policy with the nil-refund clause already in place they will be contacted and told how to make a claim if needed. Future policies won’t have the clause within them.
A spokesman for the Financial Services Authority has said that it is now up to the insurer to be able to show that the offer they make is reasonable for a refund, and that the consumer should benefit significantly from this action.
One person who strongly disagrees with these actions is Simon Burgess from payment protection insurance specialists British Insurance.
He feels that the refunds should be given on a pro-rata basis and, as it now stands, customers will still not receive everything they are entitled to as the FSA has not stipulated how the refund system should work.
He adds that single premium policies should be banned as they are “grossly unfair to the consumer”.
