"A huge victory for consumers" is how Peter Vicary-Smith, head of Which?, hailed the latest payment protection insurance (PPI) proposals from the Competition Commission. No wonder. As Thisismoney.co.uk notes, the "charge sheet against PPI" (which is meant to insure you against being unable to repay a loan or credit-card balance if you fall ill or lose your job) is long. Complaints about Britain's 13 million policies include that it's "overpriced, sold to people who can never claim on it, sold with no cancellation clause, and often ineffective". It's also often "forced on customers by pushy sales staff".
The statistics are grim. Only 14% of PPI premiums are returned to customers as a result of successful claims that's compared to 78% for car insurance and 54% for home insurance. And as Caroline Binham reports on Bloomberg, the regulator found in June that PPI providers overcharge customers by £1.4bn a year, against annual sales of £5.5bn. So what's changing? The Competition Commission stopped short of banning PPI altogether. But it is banning "single premium policies", where the premium is paid up front and often added to the original loan as a lump sum. Providers will also be stopped from pushing customers to take PPI immediately. They will have to wait 14 days and tailor any quote to ensure the policy is suitable.
Fine, say the banks but loan rates will rise because the income from PPI sales often subsidises interest charges. And the changes come just as people need cover going into a recession. This is "nonsense", as The Independent's Julian Knight puts it. There's "never a good time to be mis-sold a policy". The extra transparency should stop millions from buying cover they either don't need, or that doesn't do what they expect. If you think you may have been sold an unsuitable PPI plan some campaigners reckon there's a problem with up to half of them you can complain to the Financial Ombudsman
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Bank of England holds interest rates at 16-year highNews Interest rates have been frozen at 5.25% for the sixth consecutive monetary policy meeting. Here is what it means for your money.
-
RICS: Property listings rise, but buyer demand coolsNew listings are putting a spring in the step of the UK housing market – but where have the buyers gone? We delve into the latest Royal Institution of Chartered Surveyors (RICS) survey
