Payment Protection Insurance – Cover you don’t need

Payment protection insurance is perhaps one of the most dubious and overpriced financial products on the market.

Sold at the point of securing credit, there are currently over 20 million policies in existence generating over £6 billion in revenue for banks and loan providers.

These premiums can add between 25 - 56 per cent to the cost of a loan, plus interest. Yet despite the significant cost, only 4 per cent of policy holders ever need to claim, and only a quarter of these claims are successful. This means that for the vast majority of policy holders, payment protection insurance is a completely pointless expense.

In light of this, a number of consumer protection groups have launched investigations into the validity of payment protection insurance, together with the selling practices used to push these policies onto customers.

According to the consumer advisory group ‘Which’ as many as two million people may have been sold payment protection insurance they do not need and cannot use – and if you are a member of the emergency services with a PPI policy, then you are probably one of them.

Beware of the small print

Payment protection insurance is not necessarily a bad product; it is designed to meet repayments for a year in the event of an accident, sickness or unemployment.

However, these agreements are usually riddled with clauses that could mean you are unable to claim if the need arises. These can include policies that do not pay out until you have been unemployed for six months, or clauses that exempt existing medical conditions or accidental injuries where personal fault can be attributed as the cause.

The problem is most payment protection insurance policies are ill-fitting. They won’t do the job for which they are intended, because you do not match the profile as defined through the numerous clauses detailed in the small print – and this is particularly true when it comes to emergency services personnel.

Because of the nature of the job, police, fire and ambulance personnel are not likely to be made redundant, and if you are injured on or off the job and cannot work, you will still be paid your salary.

In fact the only time when you would need the cover is if you were to make yourself unemployed through quitting or getting sacked, and guess what – there is a clause in all PPI policies absolving insurers from making payments under these circumstances.

Penalties

In January 2009 the Competition Commissioner issued its findings following an investigation into the PPI market. It found that it was necessary to introduce significant measures carefully designed to address the serious competition problems that currently exist in this area.

It commented that selling the policies when a loan is arranged has meant that leading providers have faced little competition and, as a result, have charged persistently high prices.

Amid further claims that people were being sold policies that were of no use to them as a condition of being accepted for a loan, the Financial Services Authority (FSA) stepped in and fined a number of big players in the industry. These include Egg, Liverpool Victoria and Alliance and Leicester, which was fined a record £7 million for serious failings in its PPI telesales practices.

Due to these decisions, the floodgates have been opened for anyone who feels they were mis-sold a policy to claim their money back.

How do you know if you have been mis-sold a PPI policy?

If you think that you may have been mis-sold a PPI policy on a loan or credit agreement, read the checklist below to see if you may be eligible to make a claim.

Mis-sold policy checklist

If you can answer ‘no’ to one or more of these questions and you signed up to the policy in the past six years, then you may be eligible to claim your money back.

• If the insurance was optional, was that made clear to you?
• Did the adviser tell you about any significant exclusions under the policy – for example, the exclusion that says you won’t be covered for any pre-existing medical condition?
• If you took out a loan or finance agreement, did the adviser make it clear that you would have to pay for the insurance up front in one single payment?
• If you had to pay for the PPI as a single payment, did the adviser make it clear that the insurance cost would be added to the loan and you would be paying interest on it?
• Single premium PPI insurance normally only lasts for 5 years. If your loan or finance agreement was for longer than this, did the adviser make it clear that the insurance would run out before you had finished paying for your loan or finance agreement? The adviser should also have told you that you would continue to pay interest on the insurance premium, even after the insurance expired.

Been mis-sold? What to do next

If you believe you have been mis-sold a payment protection policy then you can, and should, take action to get your money back.

In this scenario, there are two options available; handle the claim yourself, or refer your case to a specialist claim company, who will take responsibility for your claim for a small fee.

Handle the claim personally

If you decide to make a claim on your own, you will need to be prepared.

Despite being caught red handed mis-selling their policies, the companies behind payment protection insurance are fighting tooth and nail to keep the money they have made.

In fact, lenders are so adamant in their intent to keep their ill-gotten gains that they have been accused by the Financial Ombudsman of “deliberately trying to obstruct the Ombudsman process”.

They have been rejecting all consumers’ initial requests to reclaim in an attempt to dissuade people from pursuing the matter, or referring it to the Financial Ombudsman.

In short, if you are going to pursue your claim independently, you should bare in mind that you will be entering into a lengthy dispute with the company concerned.

Refer your case to a claim company

By referring your case to a specialised company you can take the hassle out of your claim.

Firms operating in this area have the knowledge and expertise to get results fast. This means that you do not have to personally fight with your loan provider every step of the way, nor do you need to concern yourself with the legalities of the claim process.

Most companies operate on a no win-no fee basis, meaning that if your claim is unsuccessful, you do not pay a penny.

Here, ES News have teamed up with a selection of PPI specialists who can help you to claim what is rightfully yours - so don’t delay, get your claim filed today.

Related links

www.loanresolutions.co.uk
www.themoneypuzzle.co.uk