Investigations Of Mis-Selling Life Cover And Payment Protection Policies Is Underway
Summary
Some of the ways in which the insurance industry is tackling the mis-selling of life insurance. The difficultieslinked to payment protection policies are highlighted.
The mis-selling of life insurance cover by a large number of mortgage providers has to be addresseddealt with|tackled} by the Government. Steps have been taken by the DTI, who have almost concluded their investigationinto the lock in of home insurance with a mortgage. An announcementbarring the practice is Mr Timesgoes on saying that while lenders may not insist on customers taking out life insurance , they can be convinced that they do not have a choice, through the provider being evasive with the truth.
55 per cent of life cover is sold by mortgageproviders, although it can be purchased through direct providers or independent advisers.
However a Department of Trade and Industry spokesman has said that their investigation continues into a huge range of insurance tie-ins. A provider who met Jonathon Shaw has said that life insurance has been looked at in passing , whereas more importance has been placed on home and contents.
The problem with customers being forced to buy uncompetitive life insurance and home insurance policies is similarly essential for both products.
The concerns are especially severe with PPI. As much as 1/2 of all customers who have been swayed into taking out a payment protection insurance may have been given the wrong type of insurance. In addition the majority of individuals who bought one of these questionable policies expect much more than they would in truth receive should they not be able to pay their bills.
A wide-ranging investigation has brought to light that about 25% of the population believe that they will earn a monthly income from their PPI policy, not understanding that the insurance would only cover their debts.
Another twenty per cent said they understood the policy would protect them if they if they were unable to meet their repayment commitments for any reason, and 8% said they believed tha| their medical costs would be paid if they suffered ill health.
Many people thought the insurance would carry on indefinitely to meet their outstanding debts, others thought their insurance would cover motor car breakdowns and household bills.
Annual sales of Payment Protection Insurance policies are said to generate premiums of around £5.4bn for the insurance industry. However a stunning 3 9 billion pounds of this is said to be pure profit. Investigations suggest that a number of banks can charge up to 600% more than others for the same product.
The OFT is examining the sale of Payment Protection Insurance following complaints from Citizens Advice and the National Consumer Council. It recently pointed out disquiet that banks are attracting customers by advertising seemingly cheap loans and then hammering them with huge extra costs by selling expensive Payment Protection Insuranceas part of the transaction.
As a consequence, a loan which appears to give good value turns out to be far more expensive.
