Summary
The ways in which the insurance industry is dealing with mis-sold life insurance policies. The difficultiesassociated with payment protection policies are emphasized.
The mis-selling of life insurance cover by a significant amount of mortgage lenders has to be addressed by the Government. Steps have been taken by the DTI, who have almost completed their investigationinto the tie in of home and contents insurance with mortgages. A press releaseforbidding the practice is Mr Southgoes on saying that although lenders may not insist on customers taking out life insurance, they can be convinced that they have no choice through the provider being evasive with the truth.
55 per cent of life cover is sold by mortgagelenders, however it can be bought through independent advisers, direct providers or via the internet.
Then again a DTI spokesman has said that their investigation continues into a massive range of insurance lock ins. A lender who met Jonathon Shaw has said that life cover has been looked at in passing , while more importance has been focused on home and contents.
The problem with customers being forced to buy uncompetitive life cover and home insurance plans is just as essential for both commodities.
The concerns are especially severe with PPI. Around 1/2 of all consumers who have been swayed into taking out a payment protection insurance may have been provided with the wrong type of insurance. In addition the majority of those who purchased one of these debatable insurances expect much more than they would in truth collect if they were unable to pay their bills.
An extensive analysis has found that about 25% of the population believe that they will receive a monthly income from their Payment Protection Insurance policy, not understanding that the insurance would only cover their debts.
Another 15% said they understood the policy would cover them if they if they were unable to meet their repayment commitments for any reason, and six per cent said they thought their medical costs would be paid if they fell ill .
Several people thought the insurance would carry on indefinitely to meet their ongoing debts, others thought their policy would cover breakdowns and living expenses.
Annual sales of Payment Protection Insurance policies are said to create premiums of about 5.4 billion pounds for the finance business. However a stunning 3 9 billion pounds of this is said to be sheer profit. Analysis suggests that a number of banks can charge up to five hundred per cent more than others for similar.
The OFT is examining the sale of Payment Protection Insurance preceding complaints from the National Consumer Council and Citizens Advice. It recently empasized disquiet that banks are enticing customers by advertising seemingly cheap loans and then hammering them with massive extra costs by selling pricey Payment Protection Insuranceas part of the deal.
As a result, a loan which seems to give good value turns out to be far more expensive.