The Reasons Why PPI Was A Raw Deal For Consumers

By: Nik Jones


A wide variety of factors have contributed to the Payment Protection Insurance (PPI) mis-selling scandal. PPI should have covered borrowers loan repayments if they suffered accident, sickness or unemployment. This article lists different ways in which PPI was bad for consumers, and why so many have a case for making a PPI claim.

Sales Tactics

PPI was a profitable area for financial institutions. Hence they were keen to sell large numbers of policies, with salespeople often offered significant incentives.

High pressure selling. Many borrowers have reported they felt unduly pressured into buying PPI.

Not understanding PPI was optional. Large numbers of PPI claims allege that the customer believed the insurance was compulsory, or else that they were led to believe that taking it would improve their chances of being accepted for the loan.

PPI being automatically added to quotes. Some PPI salespeople automatically gave a loan repayment amount that included the cost of PPI, and the customer had to actively opt-out of the insurance.

Not explaining product features. Often a PPI sale would conclude without the salesperson explaining the exclusions on the policy, or that the plan was single premium. (See the Product design section below).

Product Design

As the Competition Commission commented in 2009, the vast majority of PPI customers did not shop around and instead purchased the lenderís insurance. This lack of competition resulted in insurance that was expensive, and not designed with the customerís interests in mind.

Price. PPI could be very expensive. Even if you made a successful claim for a 12 month period, the amount of benefit paid may well have been less than you paid for the insurance.

Exclusions. Most PPI policies have lots of exclusions, such as being unable to claim for stress or back conditions, or the self-employed not being covered for unemployment.

Single premium. Large numbers of PPI policies were single premium, with the premium added to the loan amount. The insurance term was typically three to five years, yet the insurance premium, plus often large amounts of interest, was repaid over the full term of the loan - perhaps 25 years for certain loan types. Nearly all insurance policies, such as life, car or household insurance, involve the payment of monthly premiums, and the policyholder can stop payments at any time without any penalty, other than that the policy lapses. However, customers seeking to cancel single premium PPI early found they would still need to continue paying interest on the premium.

Claiming back mis-sold PPI has never been easier. As we have seen, there are many reasons why you may have been unfairly treated; and as mentioned under Sales tactics, you may not even be aware you had the insurance. Why not investigate how to claim back PPI today?

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PPI Refund 4 Me is a trading name of UKMS Money Solutions Limited regulated by the Ministry of Justice in respect of regulated claims management activities. CRM26720

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