Summary

Some of the ways in which the insurance market is dealing with mis-sold life insurance policies. The complicationsrelating to payment protection policies are emphasized.

The mis-selling of Life Insurance  policies by a considerable number of mortgage providers has to be attended todealt with|tackled} by the Government. Steps have been taken by the Department of Trade and Industry, who have almost finished their investigationinto the lock in of home and contents insurance with a mortgage. A press releasebarring the procedure is Mr Greggoes on saying that while providers may not demand that customers take out life insurance , they can be convinced that they have no choice through the lender being evasive with the truth.

48 per cent of life cover is sold by mortgageproviders, however it can be bought through direct providers or independent advisers.

Then again a Department of Trade and Industry spokesman has said that their enquiry continues into a large range of insurance tie-ins. A lender who met Edward Milibrand has said that life cover has been given a fleeting look, while more importance has been centred on home and contents.

The trouble with clients being pressured into buying uncompetitive life cover and home and contents insurance policies is just as important for both commodities.

The problems are much more serious with payment protection insurance. About 1/2 of all consumers who have been persuaded to take out a payment protection insurance may have been given the wrong product. Plus the the greater part of individuals who purchased one of these controversial insurances expect far more than they would in truth collect if they were unable to pay their bills.

A wide-reaching study has found that about 26% of people believe that they will earn a monthly income from their PPI policy, rather than understanding the policy would only cover their debts.

A further 15% said they understood the policy would cover them if they could no longer meet their repayment obligations for any reason, and six per cent said they believed tha| their medical bills would be paid for if they suffered ill health.

Many people thought the insurance would go on indefinitely to meet their outstanding debts, others thought their policy would cover breakdowns and living expenses.

Annual sales of Payment Protection Insurance policies are said to create premiums of about 5.3 billion pounds for the insurance industry. However anincredible 4 billion pounds of this is said to be pure profit. Analysis suggests that some banks charge up to 600% more than others for the same product.

The Office of Fair Trading is examining the sale of Payment Protection Insurance following complaints from Citizens Advice and the National Consumer Council. It recently highlighted disquiet that banks are enticing customers by advertising seemingly cheap loans and then hammering them with large extra costs by selling expensive Payment Protection Insuranceas part of the agreement.

As a result, a loan which appears to give good value turns out to be far more expensive.

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