Questions over mortgage payment protection insurance
- 24TH MAY 2007
Payment protection insurance (PPI) is proving to be a real headache for high street banks and lenders that actually provide it for consumers taking out a credit card or loan. They are still under scrutiny as a result of the ongoing Financial Services Authority investigation and, as a result, a number of questions are being asked of the actual cover each policy provides.
The sector has now been refereed to the Competition Commission for a full inquiry, with a deadline of February 2009 for its conclusion.
Various consumer groups have asked questions of payment protection insurance purely because it does not always provide good value for the consumer. It can be a high cost low value product because the high prices charged by lender do not reflect the level of cover. The exclusions of the individual policies had usually been too numerous for many successful claims to be made.
Accusations of mis-selling were rife because a number of consumers who would not be covered by the policy, the retired and part time workers for example, were pressured into purchasing payment protection insurance. However, consumers that are eligible to claim have expressed a degree of satisfaction with the product.
Payment protection insurance, if sold correctly, is an invaluable product, providing customers with a financial safety net should they become unable to work and have monthly credit commitments to meet such as loan, credit card and mortgage repayments.
However, the industry has been tainted by the greedy lenders who over price their policies and force them on to their customers, whether they would be eligible to claim or not.
The problem appears to be finding the right balance, although independent payment protection insurance providers seem to have already achieved it. The ethical British Insurance offers a standalone policy with transparent policy terms and premiums that can save an individual up to 80%.
They are the good guys of the marketplace and the Competition Commission’s investigation into payment protection insurance may just pave the way for a healthily competitive market.
