Which? has found regular premium payment protection insurance (PPI) with unsecured loans that costs as much as single premium PPI.
Most unsecured loan providers have stopped selling single premium PPI at the insistence of the Financial Services Authority (FSA) and ahead of the Competition Commission ban on the product starting in 2010.
Which? research shows that some regular premium policies are now just as expensive.
For example, taking out a £5,000 Alliance & Leicester loan with regular premium PPI now costs the same as it would have done with single premium PPI in November 2008.
Unlike single premium PPI, regular premium policies aren’t added on to the value of the loan so borrowers don’t pay interest on them, which should make them cheaper. Although regular premium PPI can be cancelled more easily and should make it easier to switch provider, insurers are free to increase premiums and reduce cover by giving policyholders 30 day’s notice.
Which? recommends that consumers get independent quotes to find out which type of cover best suits their needs.
Which?’s Lucy Widenka says, “How disappointing that some lenders appear set against offering value-for-money cover. Making regular premium PPI as expensive as single premium PPI makes lenders look as determined to make a certain amount of money from people, whatever they may be selling.
According to Moneyfacts, adding single premium PPI on to a £5,000 loan repaid over 3 years at 8.9 per cent APR from Alliance & Leicester added £1,016 to the cost of the loan in November 2008. According to the FSA, the same loan from Alliance & Leicester at the same rate with a regular premium PPI in May 2009 costs the same.
Which? is the leading independent consumer champion in the UK.
Income protection insurance: News update: 03/06/2009