In fact it is estimated that up to 50% of policies are mis-sold PPI policies. This fact led no less a sanguine body than the Citizens Advice Bureau (CAB) to declare the issue a ‘Protection Racket’ and refer the problems to the Competitions Commission.
PPI is bought by borrowers for the reassurance that credit or mortgage payments will still be covered if their personal or financial circumstances change for the worse. However, a survey by the Citizens Advice Bureaux (CAB), published in September 2005 found that 85 per cent of those that had claimed on PPI had been unsuccessful and had their claim rejected.
PPI premiums paid by CAB clients represent anything from 13 per cent to a staggering 56 per cent of the amount loaned. It is common for mis-sold PPI on loan agreements to be paid for by a one off premium included in the loan itself and for interest to be charged on PPI premiums. Sadly, many CAB clients found that they could not make a successful claim on their policy because of exclusion clauses and administrative barriers to making a claim.
Alarmingly, the CAB survey found that many mis sold PPI policies contain clauses designed to exclude people from cover! CAB clients have found that claims arising from bad backs and mental health problems are completely excluded from policies sold by some high street lenders. Also people who are self employed or who are employed in fixed term contracts also face exclusion from cover.
CAB evidence shows that borrowers are often sold policies that are completely inappropriate. CAB findings also illustrated that pressure was often brought to bear to persuade people to take out insurance that they could not afford, or did not want.
Some borrowers cannot successfully claim on their PPI policy due to unreasonable requirements to provide medical evidence. For other CAB clients the costs of obtaining medical evidence represent a considerable barrier to claiming, all of which adds up to mis sold PPI policies.
Although it seems astonishing that it has taken so long, the regulating authorities, FSA and Competitions Commission, are currently involved in an enquiry on this issue and have begun to make headway in restricting bad practise and encouraging fair competition and the supply of a wider variety of PPI products.