FSA plans for income protection

The Financial Services Authority (FSA) continues to be very worried about the mis-selling of Payment Protection Insurance (PPI).

The right PPI can provide valuable protection for consumers, but they are entitled to expect that they will be treated fairly by firms when they buy it. They must be told how this product works, what it covers, and how much it costs. At the moment, too many firms are not meeting these requirements.

New official comparisons of payment protection insurance will be introduced to help consumers get a better deal on the controversial product.

True cost of insurance

The Financial Services Authority will compile comparative tables to show the true cost of the insurance, which covers the repayments on credit cards and loans if the borrower is unable to pay because of accident, sickness or unemployment.

The tables are designed to encourage consumers to shop around for the cover and will be made public and displayed online at the FSA website from March 2008.

Consumers using the tables will be asked a series of questions in order for the tables' results to be tailored to their needs.

They will then be given a table of products that they can refine, sort and shortlist to help them find the most suitable product.

The tables will feature policies to cover repayments on mortgages, secured and unsecured loans, credit and store cards, as well as policies that require single and regular premiums, stand alone products and those linked to loans.

Consumers will also get information on any exclusions in the policies and how pre-existing medical conditions will be handled.

The FSA launched its comparative tables in 2001 to provide impartial information to help consumers shop around. There are currently tables for seven products, including mortgages, savings accounts and annuities.

The FSA plans to include

  • single and regular premium policies (including single premium policies for sub-prime mortgages);
  • products from standalone providers
  • unsecured personal loan products from lenders where the PPI is linked to the loan

The tables will allow consumers to compare the cost of different products, and look at other product features, conditions and exclusions.

They will ask consumers to enter information to make sure that, as far as possible, the products shown relate to their circumstances (for example ,what type of cover they are looking for, their age, how many hours they work per week). They will only use indicators that are essential for consumers to compare PPI policies covered by the tables.

The FSA  plans to include

  • unsecured personal loan PPI
  • mortgage PP
  • credit card PPI.

Whether insurers and others have to take part is at present less than clear .On one page the FSA  says companies can opt-out, but on others it says that all eligible companies will be  expected to participate. Our translation of this is that if  you really want to, you can opt out, but annoy your industry regulator at your peril.Non-participants will be ( black) listed.


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