The ‘scam’ that makes £5bn in profits every year
- 3RD MAY 2007
Talking to the Birmingham Post on 28 April, Simon Burgess from independent payment protection insurance (PPI) provider British Insurancehas spoken out against the ‘scam’ that is brings in around £5bn pounds in profits for banks and lenders every year.
Payment protection insurance is bought by many people each year who do not even realise that they have the cover as it is automatically added to their monthly loan repayment or credit card statement. This issue - among others relating to the income protection sector - is currently being tackled by the Competition Commission following investigations by the Financial Services Authority and the Office of Fair Trading.
Payment protection insurance provides cover for the duration of a loan or credit card, to ensure that monthly repayments continue in the event of the policyholder becoming unable to work due to accident, sickness or unforeseen unemployment.
The cover can bought alongside mortgages (MPPI); loans; credit cards; and also when electrical, ‘white goods’ and even furnishings are purchased on credit. With the latter, the sales spiel is so good that most customers don’t even realise they have bought the cover.
And it is at this time that customers, in most cases, get ripped off. This type of cover bought from these providers is often over priced and in many cases, unsuitable (as the number of successful calms for miss-old policies already has proved).
Burgess said that the main perpetrators of the payment protection insurance scam are the high street banks and building societies.
"On a loan requiring monthly repayments of £500,” he fumed, ”payment protection insurance usually costs borrowers around £30 per month. We offer similar cover for £8.
And not only are customers paying way over the odds for their protection – all of which goes straight in to the providers’ pockets – but many would be ineligible to claim should they ever need to.
"Consumers may be spending thousands on insurance that won't pay out if they need to make a claim, and many have grounds for complaint.”
Burgess urges everyone to consider how they were sold their policies – were they forced in to it or were they even aware they had cover? - and to read the small print to see if they have grounds for complaint.
