Policyholders still left open wide to being ripped off
- 4TH MAY 2007
The new ruling from the Government's City watchdog the Financial Services Authority (FSA) relating to a ‘nil refund’ clause in payment protection insurance (PPI) policies still leaves the policyholder vulnerable says an industry expert.
The Financial Services Authority has stipulated that new and existing single premium payment protection insurance policies - where the premiums are paid up in one go as opposed to a monthly direct debit – can no longer be subject to a ‘nil refund clause’.
The ‘nil refund clause’ has been a bug bear for many policyholders who have had this clause within their policy. It means that should they no longer need or want the protection – for example in the case of where they have taken out the protection for a loan and have paid the loan off early – they are not entitled to a refund of premiums already paid up.
In the case of the example, it would mean that the policyholder has paid for cover of a loan that no longer exists.
Simon Burgess, from independent standalone payment protection insurance provider British Insurance feels that the FSA ruling is still not enough. In a press statement he said: “The FSA intervention is lightweight…it says that consumers with a 'nil refund' clause in their contract can get a premium refund if they cancel their policy and have not made a claim or they want to repay the loan early, but key issues are being ignored.
"No parameters have been set on the level of refunds consumers can expect, and providers could keep 99 per cent of the premiums without falling foul of the FSA."
He believes that consumers should get refunds on a pro-rata basis, on both the premiums they have paid and the interest charged on those premiums.
“I strongly feel that that the only positive step in the right direction would be to put a complete stop to single premium policies” he adds.
