The Financial Services Authority (FSA) welcomes the move by Alliance & Leicester, Barclays, The Co-Operative Bank, Lloyds Banking Group (including Lloyds TSB, Halifax, and Bank of Scotland), and RBS/Natwest to stop selling single premium Payment Protection Insurance (PPI) with unsecured personal loans by the end of January 2009.
Some of these firms, along with other market players, now offer or plan to offer regular premium PPI instead of a single premium product. The FSA expects other firms still selling single premium PPI to take note of these developments.
The FSA recognises the importance of appropriate protection insurance in the current economic climate, but remains concerned over the standard of sales of single premium PPI. Customers being sold this type of product should be told how the product works, what it covers and how much it costs - especially as the cost of the PPI is added to the loan and interest charged on this amount.
FSA's Jon Pain says, "We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately."
Louise Hanson of Which? says, “These firms have recognised that the party is over for single premium PPI and the rest should follow suit. It is a fundamentally bad product and should be withdrawn from the market altogether. People need to protect their finances more than ever so providers should be developing products that meet consumers' needs and offer value for money."
Income protection insurance: News update: January 2009