2 January 2010
The problem with payment protection insurance
Posted by articleranks under: Money .
PPI insurance has been banned from sale alongside loans. Consumers wishing to purchase Payment Protection Insurance can choose to purchase a regular premium policy instead. This is because many PPI plans were widely mis-sold over the past ten years. A large number of PPI complaints passed on to the Financial Ombudsman Service are awarded in the consumer’s favour. This goes to show that payment protection insurance was routinely mis-sold and gives hopes to consumers who have had their complaints initially rejected. Complaints about payment protection insurance have been rising sharply. The Financial Ombudsman Service has already reported that it is seeing a continual increase in the number of claims being referred to the Service.
So it begs the question - why are so many people complaining about PPI?
A major reason for complaint is that people felt compelled to take out payment protection insurance. In other words, the financial institution would tell people that their loan application may fail unless they took out payment protection. Some people have reported that lenders went a step further by forcing them to take out payment protection insurance.
Not everybody should take out PPI. Anyone who already has a medical condition may not be able to claim on the policy if the condition comes back and they are unable to work. Other medical problems are also not covered and customers need to refer to the policy documents. This type of insurance is also unsuitable for those who are not in full time employment. This is because it is very difficult to make a claim on the policy if you could not prove your income and could not prove that you had a full time job.
Adding PPI to a loan makes it very expensive. This is due to the fact that interest is also paid on a single premium policy. This fact should be disclosed during the sales process but the reality is that some lenders failed to mention this. To make a successful complaint, customers need to find as much information about the policy as they are able to.
It is also helpful to have a copy of the credit agreement. Armed with this information, it is a lot easier to compose a statement of claim to the lender. Some claims are unsuccesful. Some are initially rejected by the loan provider. Now the customer has to understand why the complaint was denied and what to do next. The Financial Ombudsman Service has stated that half of all consumers give up when the complaint is initially rejected. Some people do not know which route to take next.
There is a lot of advice available online that will assist them with taking things further. For example, there are several insurance related articles online. Those who do not have the time and inclination to deal with the complaint on their own can contact a claims management company. These professionals can handle PPI complaints and you usually don’t have to pay any upfront fees. The good thing about this is that the customer can forget about dealing with the whole process. They can leave the legal stuff to a professional to deal with while they get on with other important things.