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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Mon Apr 09, 2007 1:00 am Post subject: Consumers betrayed by FSA’s PPI refund agreement |
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News that the FSA has negotiated a deal with the Payment Protection Insurance sector to offer consumers refunds on single premium PPI will not stop them being ripped off, according to Simon Burgess from British Insurance.
He believes the FSA has not gone far enough in tackling the key issues - the regulatory body does not provide any guidelines as to the level of refund consumers should expect and neither does it give any indication when these grossly-overpriced single premium policies will be outlawed.
Single premium PPI is when the consumer is asked to pay a one-off premium at the start of a loan. The premium is for cover that’s supposed to last the duration of the loan and will ensure loan repayments continue in the event of accident, sickness and unemployment. However, this premium is added onto the loan amount, resulting in consumers paying interest on their insurance premium as well as money they borrowed.
Simon comments: “This is a lightweight announcement - the FSA is saying consumers who have a ‘nil refund’ clause in their contract can get a premium refund if they cancel their policy and have not made a claim or they want to repay the loan early. But key issues have been ignored. No parameters have been set on the level of refund consumers should expect, providers could keep 99% of the premiums and they would not be falling foul of the FSA.
“Why hasn’t the FSA agreed with providers that consumers will receive a refund on the interest they’ve paid as well as the premium and why isn’t it on a pro-rata basis? Consumers who pay up front for a five-year policy and want to cancel after two years, should get three years worth of premiums back.”
Simon believes the FSA should ban single premium policies; “These policies do not Treat Customers Fairly – which is the ethos of the FSA. In the mortgage sector, the cover lasts around five years, and then the consumer is contacted and asked to take out another policy with more expense. This is under the guise that medical conditions may change, but really it’s a way of getting a further premium. Single premium mortgage payment protection is designed to provide short-term cover, so it’s useless for a 25-year loan. Consumers mistakenly believe they have paid for something that will cover them for the lifetime of their mortgage and it won’t.”
He concludes: “With Easter just around the corner many people will remember how Jesus was betrayed by Judas Iscariot. I believe the FSA is guilty of a similar betrayal of consumers.”
Ends
For further information or case studies contact: Simon Burgess Managing Director of British Insurance on 07718 152635
Editors Notes:
British Insurance regularly tops Which? and Defaqto’s ‘Best Buy’ tables. The company was awarded Mortgage Strategy magazine’s General Insurance Distributor of the Year accolade in Feb 07 and holds What Mortgage? Magazine’s Best Insurance Broker Award for 2006.
Submitted by: Stella Hulott |
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