Mis-Selling Of Payment Protection And Life Cover Policies

Summary

The ways in which the insurance market is tackling the mis-selling of life insurance. The problemslinked to payment protection policies are emphasized.

The mis-selling of life insurance cover by a substantial number of mortgage providers has to be addresseddealt with|tackled} by the Government. Steps have been taken by the DTI, who have just about completed their investigationinto the tie in of home insurance with a mortgage. An announcementforbidding the procedure is Mr Greggoes on saying that even though providers may not demand that customers take out life insurance , they can be persuaded that they do not have a choice, through the lender being ambiguous with the truth.

55 per cent of life insurance is sold by mortgageproviders, 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 continues into a massive range of insurance tie-ins. A lender who met Gordon Brown has said that life insurance has been given a fleeting look, while more importance has been placed on home insurance.

The problem with clients being pressured into buying uncompetitive life insurance and home insurance plans is equally significant for both products.

The problems are much more severe with PPI. Around half of all consumers who have been swayed into taking out a payment protection insurance may have been sold the wrong the wrong kind of policy. In addition the majority of individuals who bought one of these debatable policies expect a lot more than they would in actual fact be given should they not be able to pay their bills.

A broad analysis has brought to light that about twentysix per cent of the population are under the illusion that they will get a monthly wage from their Payment Protection Insurance policy, rather than understanding the policy would only cover their debts.

Another 20 per cent said they thought the insurance would protect them if they could no longer meet their repayment commitments for any reason, and 6% said they believed tha| their medical bills would be paid for if they fell ill.

Several people thought the insurance would continue indefinitely to cover their outstanding debts, others thought their policy would cover breakdowns and living expenses.

Yearly sales of Payment Protection Insurance policies are said to produce payments of around 5.4 billion pounds for the finance business. However a stunning 4.5 billion pounds of this is said to be pure profit. Investigations suggest that some banks charge up to 500% more than others for the same product.

The Office of Fair Trading is investigating the sale of PPI following objections from Citizens Advice and the National Consumer Council. It recently empasized disquiet that banks are luring in customers by advertising seemingly cheap loans and then hammering them with huge extra costs by selling pricey PPIas part of the deal.

As a consequence, a loan which appears to provide good value becomes far more expensive.

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