Loan insurance can work providing you understand the product
- 7TH NOVEMBER 2007
Providing that you understand the product and the limitations it has then loan insurance can provide an invaluable financial safety net in the event of you becoming unable to work due to accident, sickness or redundancy.
It is the lack of knowledge regarding the product which has given the product a bad name and which caused the majority of mis-selling when an investigation was sparked in 2005 by the Office of Fair Trading.
Following the complaint by the Citizens Advice, the Financial Services Authority (FSA) also got involved and handed out fines where they found there was wide spread mis-selling of loan insurance and income payment protection insurance policies.
High street banks received fines for failing to give the necessary information at the time of selling the policies and for putting profits ahead of the consumer’s best interest which left many holding a policy they couldn’t hope to claim against due to the exclusions.
The FSA pointed out changes that had to be made when selling loan insurance and then referred the sector to the Competition Commission who are conducting a comprehensive review into the sector which is expected to reach conclusion in February 2009. Despite some changes for the better resulting from the FSA investigations it is clear that much more still needs to be done.
The FSA recently revealed that they are investigating 4,000 cases of mis-selling in the sector. This figure has doubled from the year before despite the intervention of the Financial Services Authority and the Competition Commission, which is very worrying and does nothing to restore the lost faith in the product.
Loan insurance is best taken out with the standalone provider, as the specialist is more ethical and as they only focus on selling payment protection cover they back up their products with experience and knowledge and don’t put huge profits ahead of what’s in the consumer’s best interest.
Ethical standalone specialist British Insurance give quotes for their cover which can be up to 80% less than the quotes the high street lender gives and makes sure the consumer gets the information needed to make the right choice when it comes to buying their policy.
