Summary
Some of the ways in which the insurance industry is tackling the mis-selling of life insurance. The problemslinked to payment protection policies are pointed out.
The mis-selling of life insurance cover by a substantial number of mortgage lenders has to be attended to by the Government. Steps have been taken by the DTI, who have just about concluded their enquiriesinto the tie in of home insurance with mortgages. An announcementbarring the procedure is Mr Timescarries on that although lenders may not insist on customers taking out life insurance, they can be persuaded that they do not have a choice, through the provider being evasive with the truth.
50 per cent of life cover is sold by mortgageproviders, however it can be bought through independent advisers or direct providers.
However a Department of Trade and Industry spokesman has said that their enquiry continues into a huge range of insurance tie-ins. A lender who met Jack Straw has said that life cover has been looked at in passing , while more importance has been placed on home and contents.
The problem with consumers being forced to buy uncompetitive life cover and home and contents insurance policies is just as significant for both products.
The concerns are especially severe with PPI. About half of all consumers who have been persuaded to take out a PPI may have been provided with the wrong the wrong kind of policy. In addition the majority of those who purchased one of these debatable insurances expect a lot more than they would actually receive should they not be able to pay their bills.
An extensive investigation has found that around 25 per cent of the population think that they will receive a monthly wage from their PPI policy, rather than understanding the policy would only cover their debts.
A further 20 per cent said they believed the insurance would protect them if they could no longer meet their repayment commitments for any reason, and 7 percent said they thought their medical bills would be paid if they became sick .
Many people thought the insurance would carry on indefinitely to meet their debt repayments, others thought their policy would cover motor car breakdowns and household bills.
Yearly sales of Payment Protection Insurance policies are said to generate premiums of around £5.4bn for the finance industry. However an amazing 4 billion pounds of this is said to be sheer profit. Investigations suggest that some banks charge up to 500% more than others for a comparable product.
The Office of Fair Trading is studing the sale of PPI following objections from the National Consumer Council and Citizens Advice. It recently pointed out concerns that banks are luring in customers by advertising deceptively cheap loans and then hammering them with massive additional costs by selling pricey Payment Protection Insuranceas part of the deal.
As a consequence, a loan which seems to give good value becomes far more expensive.