Lloyds Banking Group stopped selling policies to new customers alongside Lloyds TSB, Halifax, Bank of Scotland, C&G and Black Horse personal loans, credit cards and mortgages earlier this month.
Lloyds will honour all PPI applications on loans and credit cards until 31 July, and all mortgage applications until 20 November but it won't take new applications.
Paymentshield insurance director Neil Galjaard said: “Lloyds will have their own reasons for the decision to stop selling PPI. The concern is for the customers who take mortgages and loans with the bank and do not adequately protect themselves against loss of job or sickness. This is a real risk in what is still a very uncertain economic environment.
“It will be difficult for a customer to know where to turn for their security. Income and mortgage protection insurance are great products helping customers with real issues.
“Independent intermediaries have the advantage of being able to offer quality and affordable cover ensuring that a complete service is offered to their customers.”
The Competition Commission is expected to enforce its preliminary findings and insist that a seven-day cooling off period is enforced before consumers can purchase a PPI product.
This point of sale ban will gravely impact on lenders' ability to profit from these policies as they are traditionally sold at the same time as a loan or mortgage is taken out.
A Lloyds spokeswoman said that “further changes in regulation will make it uneconomic to continue to offer these products in their current form”.
HSBC stopped selling PPI as a standalone product in 2007. Royal Bank of Scotland and NatWest only offer the cover with mortgages and loans of between £25,000 and £35,000, while Nationwide also only offers it with mortgages. Barclays is in the process of phasing out the sale of the cover.
Galjaard added: “There is a huge gap in massive market that is tailor-made for brokers to plug. In doing so they bring added value to their client service and make some much-needed commission at the same time.”
