Summary
Some of the ways in which the insurance industry is dealing with the mis-selling of life insurance. The difficultiesassociated with payment protection policies are highlighted.
The mis-selling of Life Insurance policies by a sizeable amount of mortgage lenders has to be attended todealt with|tackled} by the Government. Action has been taken by the DTI, who have nearly concluded their investigationinto the tie in of home and contents insurance with a mortgage. A press releasebarring the procedure is Mr Southgoes on saying that even though providers may not demand that customers take out life insurance , they can be persuaded that they do not have a choice, through the provider being economical with the truth.
60 per cent of life insurance is sold by mortgagelenders, although it can be purchased through independent advisers, direct providers or via the internet.
However a DTI spokesman has said that their enquiry carries on into a large range of insurance lock ins. A lender who met Stephen Byers has said that life insurance has been glanced at, whereas more emphasis has been focused on home and contents.
The problem with clients being pressured into buying uncompetitive life insurance and home insurance plans is equally important for both commodities.
The problems are even more severe with PPI. About 1/2 of all clients who have been swayed into taking out a payment protection insurance may have been provided with the wrong product. In addition the majority of individuals who purchased one of these controversial insurances expect much more than they would in truth receive should they not be able to pay their bills.
An extensive survey has found that around 26 per cent of the population think that they will receive a monthly income from their PPI policy, rather than understanding the policy would only cover their debts.
Another fifteen per cent said they understood the policy would cover them if they if they were unable to meet their repayment obligations for any reason, and 8 per cent said they believed tha| their medical bills would be paid if they fell ill.
Several people thought the policy would continue indefinitely to meet their ongoing debts, others thought their insurance would cover breakdowns and living expenses.
Annual sales of PPI policies are said to produce premiums of about 6.4 billion pounds for the insurance business. However a mind-blowing 4 billion pounds of this is said to be sheer profit. Investigations suggest that a number of banks can charge up to 500 per cent more than others for the same product.
The Office of Fair Trading is examining the sale of PPI preceding objections from the National Consumer Council and Citizens Advice. It recently pointed out disquiet that banks are attracting customers by advertising deceptively cheap loans and then hammering them with large extra costs by selling expensive Payment Protection Insuranceas part of the agreement.
As a consequence, a loan which appears to give good value turns out to be far more expensive.