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Around Half Of The 20 Million Loan Insurance And Mortgage Insurance Policies In The UK Could Have Been Mis-sold

There are around 20 million loan insurance and mortgage insurance policies in the UK and it is thought that around half of these could have been mis-sold. The mis-selling scandal came to the publicís attention in 2005 when it both the Office of Fair Trading and the Financial Services Authority started investigations in to the sector. Fines were subsequently handed out to several well known high street lenders and providers of payment protection insurance (PPI).

The majority of those who received fines were high street lenders who were pushing the cover alongside a loan or credit card while giving out very little information regarding the exclusions. This meant the consumer was buying a product they did not understand.

However, it is important to realize that it is the poor selling techniques and lack of knowledge those selling loan payment protection insurance that have caused the problems with loan cover and not the actual policy itself. When bought correctly with the exclusions in mind loan protection can work the way it is designed to do and can give a financial lifeline to those with a lost income.

The Financial Services Authority set out guidelines and recommendations for providers to follow which it was hoped would put an end to the mis-selling. While some have followed these guidelines, the Financial Services Authority (FSA) announced that they have investigated over 4,000 cases of mis-selling in 2007 which was double the amount of the year previous. This clearly means that much more has to be done if faith in the products is to be restored.

Providing a policy is suitable for your circumstances then the cover would begin to payout once you had been out of work for a pre-determined amount of time which is usually between 31 and 90 days. Once the policy has begun to payout then it would continue to do so for between 12 and 24 months again depending on the provider. Loan insurance can be a very valuable lifeline to have because getting behind on the repayments means at the very least earning yourself a bad credit rating which can take years to remedy.

You do need to look out for the exclusions within the cover. Some of the most common exclusions include working part time employment, suffering an illness which is ongoing or if you are of retirement age. There can be others depending on the provider so it is essential that you do read the key facts of the policy before you buy it.

One of the changes in the pipeline when it comes to the way that all payment protection insurance policies are sold is the introduction of comparison tables by the FSA. The tables will highlight the exclusions in a policy and will also tell the consumer how much the cover would cost. To help the consumer choose between which type of payment protection insurance would be most suitable for their needs there will be a serious of questions which will lead to the correct solution and the individual getting the cover which best suits their circumstances.

Submitted by:

Simon Burgess

Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of loan insurance, mortgage payment protection insurance and income protection insurance.




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