Life Insurance and PPI
Posted in Life Insurance on 08/27/2009 04:07 pm by adminSummary
Some of the ways in which the insurance industry is dealing with mis-sold life insurance policies. The complications relating to payment protection policies are pointed out.
The mis-selling of life cover by a considerable amount of mortgage providers has to be tackled by the Government. Steps have been taken by the DTI, who have nearly finished their investigationinto the tie in of home and contents insurance with mortgages. A press release forbidding the procedure is Mr Times continues by that while lenders may not insist on customers taking out life insurance, they can be persuaded that they have no choice through the lender being economical with the truth.
48 per cent of life cover is sold by mortgage providers, although it can be purchased through independent advisers or direct providers.
Then again a Department of Trade and Industry spokesman has said that their enquiry carries on into a large range of insurance tie-ins. A provider who met Gordon Brown has said that life insurance has been looked at in passing , whereas more importance has been focused on home and contents.
The problem with customers being pressured into buying uncompetitive life insurance cover and home insurance plans is similarly essential for both commodities.
The problems are doubly serious with payment protection insurance. About 1/2 of all consumers who have been influenced into taking out a PPI may have been given the wrong the wrong kind of policy. Plus the majority of people who bought one of these controversial insurances expect much more than they would actually receive should they not be able to pay their bills.
A broad study has found that about 25 per cent of people think that they will earn a monthly income from their Payment Protection Insurance policy, rather than understanding the policy would only cover their debts.
Another twenty per cent said they thought the policy would cover them if they could no longer meet their repayment obligations for any reason, and six per cent said they believed that their medical expenses would be paid if they were to taken ill .
Many people thought the policy would go on indefinitely to meet their ongoing debts, others thought their insurance would cover motor car breakdowns and household bills.
Annual sales of Payment Protection Insurance policies are said to make premiums of around 6.4 billion pounds for the insurance industry. However an astounding 4.5 billion pounds of this is said to be sheer profit. Analysis suggests that some banks charge up to 500 per cent more than others for a comparable product.
The OFT is studing the sale of Payment Protection Insurance preceding objections from the National Consumer Council and Citizens Advice. It recently highlighted concerns that banks are attracting customers by advertising deceptively cheap loans and then hitting them with massive additional costs by selling expensive Payment Protection Insuranceas part of the deal.
As a result, a loan which may appear to offer good value turns out to be far more expensive.