Mis-Selling Of Payment Protection And Life Cover Policies
Summary
Some of the ways in which the insurance industry is tackling mis-sold life insurance policies. The difficultiesrelating to payment protection policies are emphasized.
The mis-selling of Life Insurance policies by a significant amount of mortgage lenders has to be attended todealt with|tackled} by the Government. Action has been taken by the DTI, who have just about concluded their investigationinto the lock in of home and contents insurance with mortgages. An announcementpreventing the procedure is Mr Sissonsgoes on saying that although providers may not demand that customers take out life insurance , they can be persuaded that they have no choice through the provider being economical with the truth.
48 per cent of life insurance is sold by mortgagelenders, although it can be purchased through direct providers or independent advisers.
Then again a Department of Trade and Industry spokesman has said that their enquiry carries on into a large range of insurance tie-ins. A lender who met Edward Milibrand has said that life cover has been looked at in passing , while more importance has been focused on home insurance.
The problem with consumers being forced to buy uncompetitive life cover and home insurance policies is equally important for both commodities.
The problems are doubly severe with PPI. As much as half of all consumers who have been persuaded to take out a PPI may have been sold the wrong product. Plus the majority of people who bought one of these controversial policies expect far more than they would in truth be given if they could not pay their bills.
A broad investigation has found that about 26% of the population believe that they will earn a monthly income from their Payment Protection Insurance policy, not understanding that the insurance would only cover their debts.
A further twenty per cent said they thought the insurance would cover them if they if they were unable to meet their repayment commitments for any reason, and 7 percent said they believed tha| their medical bills would be paid if they suffered ill health.
Many people thought the insurance would keep going indefinitely to cover their outstanding debts, others thought their insurance would cover motor car breakdowns and household bills.
Annual sales of Payment Protection Insurance policies are said to make payments of about 5.4 billion pounds for the finance industry. However a stunning 4 billion pounds of this is said to be sheer profit. Analysis suggests that some banks can charge up to 500 per cent more than others for similar.
The Office of Fair Trading is investigating the sale of PPI following complaints from Citizens Advice and the National Consumer Council. It recently pointed out concerns that banks are enticing customers by advertising seemingly cheap loans and then hammering them with large extra costs by selling expensive PPIas part of the transaction.
As a consequence, a loan which may appear to give good value becomes far more expensive.