Mis-Selling Of Payment Protection And Life Cover Policies
Summary
The manner in which the insurance industry is dealing with the mis-selling of life insurance. The problemslinked to payment protection policies are highlighted.
The mis-selling of life insurance cover by a substantial amount of mortgage lenders has to be tackled by the Government. Action has been taken by the Department of Trade and Industry, who have just about completed their investigationinto the lock in of home insurance with a mortgage. An announcementbarring the practice is Mr Timescontinues by that while lenders may not demand that customers take out life insurance, they can be convinced that they do not have a choice, through the lender being evasive with the truth.
60 per cent of life insurance is sold by mortgagelenders, however it can be bought through independent advisers or direct providers.
However a DTI spokesman has said that their enquiry continues into a massive range of insurance tie-ins. A lender who met Gordon Brown has said that life insurance has been glanced at, whereas more importance has been focused on home insurance.
The problem with clients being forced to buy noncompetitive life insurance and home and contents insurance plans is equally significant for both products.
The concerns are especially severe with payment protection insurance. About 1/2 of all customers who have been persuaded to take out a PPI may have been given the wrong type of insurance. In addition the the greater part of individuals who purchased one of these controversial policies expect a lot more than they would in actual fact collect if they could not pay their bills.
A broad investigation has brought to light that approximately 25% of people think that they will be paid a monthly wage from their Payment Protection Insurance policy, rather than understanding the policy would only cover their debts.
Another 15% said they believed the policy would cover them if they if they were unable to meet their repayment obligations for any reason, and 7% said they believed that their medical costs would be paid if they suffered a critical illness .
Many people thought the insurance would carry on indefinitely to meet their ongoing debts, others thought their policy would cover motor car breakdowns and household bills.
Annual sales of PPI policies are said to make payments of about five billion four hundred thousand pounds for the finance industry. However a mind-blowing 4.5 billion pounds of this is said to be pure profit. Studies suggest that a number of banks charge up to six hundred per cent more than others for the same product.
The Office of Fair Trading is examining the sale of Payment Protection Insurance following complaints from Citizens Advice and the National Consumer Council. It recently pointed out disquiet that banks are tempting customers by advertising seemingly cheap loans and then hammering them with huge additional costs by selling pricey PPI as part of the deal.
As a result, a loan which may appear to provide good value turns out to be far more expensive.