PPI

Payment protection insurance (PPI) has become something of an enigma. A black enigma perhaps? It is most people's experience that the banks and Insurance companies are sweet talking when they want you to sign up for a new Insurance policy but come claim time and they make you feel uncomfortable and almost guilty in making the claim.

It is true to say that Insurance is willingly given to people who don't want it but these same companies are reluctant to insure the people who really need it and may need to claim.

We accept that in all forms of insurance -be it home, car or whatever - some claims are rejected and some are accepted.

In the case of PPI however, the number of claims rejected have been abnormally high and according to The Financial Services Authority unfair. The main reason is that the payment protection insurance (PPI) sold by an enthusiastic and highly commissioned salesperson is signed off by the buyer without full disclosure or understanding the small print of the policy. In many cases payment protection insurance has been added to the loan policy or credit card plan without the customer even knowing about it.

The concept of PPI is sound. If the borrower takes out a personal loan or credit card the PPI will cover repayments in a situation where the borrower is unable to repay the loan due to illness, unemployment or any other reason.

Up to as many as 40 million PPI policies have been sold. They have been a huge business bonanza for The Insurance giants and the Banks. But the gruesome truth is that about 90% of these policies have been mis-sold.

Unlike other types of Insurance such as home or car insurance, PPI policies are complex little devils with so many disclaimers in the small print that it is very, very difficult for the policyholder to claim.