Summary
The manner in which the insurance market is dealing with the mis-selling of life insurance. The problemsassociated with payment protection policies are pointed out.
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The mis-selling of life insurance policies by a sizeable number of mortgage providers has to be tackled by the Government. Action has been taken by the Department of Trade and Industry, who have almost completed their investigationinto the tie in of home insurance with mortgages. A press releasebarring the procedure is Mr Timescontinues by that while lenders may not demand that customers take out life insurance, they can be persuaded that they have no choice through the lender being evasive with the truth.
55 per cent of life cover is sold by mortgageproviders, although it can be purchased through independent advisers or direct providers.
Then again a Department of Trade and Industry spokesman has said that their investigation carries on into a large range of insurance tie-ins. A lender who met Jonathon Shaw has said that life cover has been glanced at, while more importance has been placed on home and contents.
The problem with clients being forced to buy noncompetitive life insurance and home and contents insurance policies is just as significant for both commodities.
The problems are especially severe with payment protection insurance. About 1/2 of all consumers who have been influenced into taking out a payment protection insurance may have been given the wrong the wrong kind of policy. In addition the majority of people who bought one of these suspect policies expect much more than they would in truth be given if they were unable to pay their bills.
A broad analysis has brought to light that around twentysix per cent of people 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 15 per cent said they thought the insurance would protect them if they could no longer meet their repayment commitments for any reason, and 7% said they believed that their medical bills would be paid for if they fell ill .
Many people thought the insurance would go on indefinitely to meet their debt repayments, others thought their policy would cover motor car breakdowns and household bills.
Yearly sales of PPI policies are said to make payments of about 5.3 billion pounds for the insurance business. However an amazing 4.5 billion pounds of this is said to be sheer profit. Analysis suggests that a few banks can charge up to six hundred per cent more than others for a comparable product.
The OFT is examining the sale of Payment Protection Insurance following objections from the National Consumer Council and Citizens Advice. It recently empasized disquiet that banks are enticing customers by advertising apparently cheap loans and then hitting them with large extra costs by selling expensive PPIas part of the agreement.
As a result, a loan which seems to offer good value can end up being far more costly.
