As Lloyds Banking Group adds its weight to Barclays' challenge of the Competition Commission's point of sale ban for Payment Protection Insurance (PPI), Which? chief executive, Peter Vicary-Smith, says: “It is outrageous that a taxpayer-backed bank is challenging the Competition Commission for the right to sell a rip-off product to the very taxpayers who bailed it out. Barclays and Lloyds should focus their energies on developing decent products that offer genuine, affordable protection. PPI has been dissected and discredited through numerous investigations and FSA fines and the Financial Ombudsman continues to uphold the majority of complaints in favour of the customer. We cannot understand why Barclays and Lloyds seem intent on swimming against the tide."
Some of the key decisions from the Commission:
- Banning the sale of single premium policies
- Prohibiting the sale of PPI by the credit provider within 7 days of the sale of the credit
- Credit providers have to give consumers a personal PPI quote which states the cost of the insurance on its own and when added to the credit product
- The provision of an annual statement to all PPI customers reminding them that they can cancel the policy. The statement has to be sent separately from the credit statement
- Solutions for making advertising clearer
- Obligatory information provision to the FSA for publication in their PPI comparison tables and on annual GWP (Gross Written Premium) and claims ratios to the OFT
Information on PPI
- PPI only pays out for a limited amount of time, usually 12 months, although some policies offer a 24-month payout period
- Credit and store card PPI often covers only the minimum amount that must be paid each month
- When sold alongside loans or finance agreements, PPI is currently sold as a ‘single premium policy', which means a lump sum covering the cost of the insurance is added to the amount you have borrowed, so you end up paying interest on both the insurance premium and the loan
- PPI policies last for just five years, so if your loan or finance agreement is for longer than this, you'll still be paying interest on a policy that has long since expired
Other consumer and insurance organisations have also blasted the banks, they argue that at a time when the word ‘banker’ is an insult, that for these banks to seek to support the sale of their existing products that have been found wanting, is an outrage. Which? may not be able to understand why these two are making themselves even more hated, but others do, it is the huge profits they make from the policies that they either sell on fat commission or underwrite themselves.
Income protection insurance: News update: 02/05/2009