Summary
The manner in which the insurance industry is tackling the mis-selling of life insurance. The complicationslinked to payment protection policies are emphasized.
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The mis-selling of life insurance cover by a large number of mortgage lenders has to be tackled by the Government. Action has been taken by the DTI, who have nearly completed their enquiriesinto the tie in of home insurance with mortgages. An announcementforbidding the procedure is Mr Greggoes on saying that even though providers may not demand that customers take out life insurance, they can be persuaded that they have no choice through the lender being economical with the truth.
48 per cent of life insurance is sold by mortgagelenders, although it can be purchased through independent advisers, direct providers or via the internet.
Then again a DTI spokesman has said that their enquiry continues into a massive range of insurance lock ins. A provider who met Jonathon Shaw has said that life insurance has been given a fleeting look, while more importance has been focused on home insurance.
The problem with customers being pressured into buying uncompetitive life cover and home insurance plans is equally significant for both products.
The problems are especially severe with payment protection insurance. As much as 1/2 of all clients who have been influenced into taking out a PPI may have been given the wrong type of insurance. Plus the the greater part of people who bought one of these questionable policies expect much more than they would in truth receive if they were unable to pay their bills.
A broad survey has found that about 25 per cent of people are under the illusion that they will be paid a monthly wage from their PPI policy, rather than understanding the policy would only cover their debts.
A further 15 per cent said they believed the policy would protect them if they could no longer meet their repayment obligations for any reason, and 7 percent said they thought their medical bills would be paid for if they were to taken ill .
Many people thought the policy would go on indefinitely to meet their ongoing debts, others thought their policy would cover motor car breakdowns and household bills.
Yearly sales of Payment Protection Insurance policies are said to create premiums of about £5.4bn for the insurance business. However a stunning 4.5 billion pounds of this is said to be pure profit. Investigations suggest that several banks charge up to six hundred per cent more than others for a comparable product.
The Office of Fair Trading is investigating the sale of Payment Protection Insurance preceding complaints from the National Consumer Council and Citizens Advice. It recently empasized concerns that banks are tempting customers by advertising seemingly cheap loans and then hitting them with huge additional costs by selling expensive Payment Protection Insuranceas part of the deal.
As a consequence, a loan which appears to offer good value ends up being much more expensive.