Sweeping Reforms – How PPI Made Lasting Changes on How Financial Products are Sold
Payment protection insurance (PPI), although mis-sold to thousands of customers across the UK, is still a product that you could use.
You would think with all the issues surrounding it, that it would have been withdrawn from sale but let’s face it, the issue was NOT the policy itself but the way in which it was sold.
How selling of PPI has changed...
Published pay-out rates
Banks and lenders, if they choose to continue to sell PPI to customers must now follow new rules. One complaint that the regulator had about PPI was the incredibly low pay out rate of PPI.
If you knew that the insurance policy you were paying for only paid out in 15% of cases, would you opt for it?
Hence, the banks or lender selling PPI needs to publish annual pay-out rates so people can use this information as part of their decision making process.
Allow customers to shop around
Another major issue with PPI was that banks and lenders did not tell their customers that the policy was optional.
The regulator now says that this must be made explicitly clear and for customers to be able to shop around for the best deal for them, much in same way we do for other insurance products (or should!).
Single payment premiums no longer allowed
These policies were sold to many people and involved the customer paying upfront, in one lump sum for the PPI policy.
Apart from the fact they may not have been covered under the terms and conditions of the policy, if they wanted to cancel it, the bank were not keen on giving them their money back.
In a similar way, single premium policies did always run for the length of the loan either. For example, the loan may run for 10 years but the policy only covered the first 5 years of the loan.
Selling alongside the main product
At one time, if you went to your bank or lender for a loan, you were sold the loan.
What then became popular, due to commission and profit reasons, was the selling of products alongside the main item.
The Financial Conduct Authority feels – as do various consumer groups – that when people are applying for mortgages, loans etc. they should be given time to consider any additional products they agree to.
People are often swayed by emotion – imagine being on the brink of purchasing your first home when it is suggested to you to buy an insurance policy alongside and it just might help clinch the deal...?
If you are shopping around for PPI type insurances, it is a wise move to take the advice of an independent financial advisor. With no interest in products offered by just ONE company, you will be getting the right advice for YOU!
In the meantime, if you have PPI on your accounts, you may be able to claim back every penny in premiums paid – and interest! To find out how, call Payment Protection Scotland.