The findings echo those of a similar mystery shopping exercise undertaken recently by the FSA. They reveal a massive gulf between how loan protection is supposed to be sold and how it is sold in practice and a huge variation in the prices charged.
The survey, carried out on behalf of British Insurance Ltd by compliance consultant Keith Clark who has over thirty years experience of the insurance industry, investigated loan protection sold by lenders chosen from the High Street, national newspapers, the internet and the telephone directory. It found that:
* Providers did not pay enough attention to the fact Clark was self-employed and that loan protection, which only pays out if the self-employed actually ceases trading, might therefore be inappropriate – only 60 per cent of available policy summaries warned about such restrictions
* Lenders do not always adhere to FSA rules that oblige them to make it clear whether they are giving advice or providing generic information - disclosure documents that tell customers if advice is being given were only supplied in 62.5 per cent of cases
* Prices per £100 of monthly cover varied from £5.95 to £30.99 a month
Simon Burgess, managing director of British Insurance Ltd, said: "Policies obviously vary in their scope of cover, but don't try telling me that they do so by amounts that necessitate such huge price differentials. There is blatant profiteering taking place.
"I have met with the Office of Fair Trading (OFT) to provide background information on the payment protection market in conjunction with the Super Complaint recently made by Citizens Advice. The OFT has specifically requested to see the results of this survey."
