Payment Protection Insurance (PPI) has received a good deal of bad press over the last few months due to reports of extortionate rates, unfair policy exclusions, and unscrupulous selling practices of credit and loan providers; see our Payment Protection Insurance guide. For consumers seeking peace of mind against the threat of financial hardship due to illness or redundancy, the insurance policies should be a responsible move. In reality they often push people further into debt with inflated premiums, while also containing a raft of exclusions making it difficult to make a successful claim. In addition, such policies are often automatically included in quotations or online forms, giving consumers the impression that they are obligatory.

In September 2005, the Citizens Advice Bureau made a super complaint to the OFT, asking them to investigate the increasing number of complaints in relation to the unfair nature and mis-selling of such policies. In response to that the Competition Commission has published it provisional findings in which they have found that:

1. Consumers are generally being overcharged

2. The complexity of the product and the way it is presented to consumers, means a like for like comparison is impossible, and certainly not encouraged.

3. The routine inclusion of PPI with a loan or credit application means consumers are unaware of the following:

  • That the policy is optional
  • That their loan application has a greater chance of success with the purchase of such a policy
  • That there are ‘stand alone’, and potentially better value policies available from alternative providers

While the Competition Commission is aware of the large number of complaints due to mis-selling, this aspect of the investigation is to be handled by the Financial Services Authority (FSA).

For further information, see:

  • Competition Commission (External link to PDF guide)