Jill Insley: Bad deal for borrowers talked into loan insurance

Jill Insley: Bad deal for borrowers talked into loan insurance

Borrowers are being treated unfairly and getting poor value for money from some firms selling payment protection insurance. This is the overwhelmingly grim conclusion of investigations into the PPI market by the Office of Fair Trading and the Financial Services Authority.

The watchdogs say the amount paid out in claims is low compared with the sums spent on PPI by customers, indicating that insurers are making big profits. Customers are given little upfront information about PPI before being asked to sign up for it, and in some cases are told or given the impression that buying it would help their application for credit. Some sellers fail to establish that their policies are suitable for the customer, and are still not telling their customers that the purchase of PPI is optional.

The OFT is planning to refer the PPI market to the Competition Commission, but any improvement resulting from this will take many months, if not years, to filter through. In the meantime it is up to borrowers to make sure they are not taken for a ride.

Remember you do not have to buy PPI when applying for a personal loan, mortgage or credit card. If you do want to buy cover, shop around on the internet for the best value policies. If you are self-employed or suffering from a pre-existing illness or disability, you may not be able to claim on parts of a PPI policy. Ask whether the policy offered will actually cover you. And if you are paying a single premium to buy the.....continued below

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policy, check how much you will get back if you pay the loan off early.

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