Shane Craig, managing director of Paymentcare, has called for an urgent switch to a US-style sales system where banks are forbidden from pushing PPI and accident, sickness and unemployment (ASU) cover.
He said: “When a consumer buys single premium cover they are often forced to pay the fee upfront along with a separate fee for the arrangement. For five-year cover to the value of £5,000, the customer will also be charged a fee of about £50 a month.
“Again the client will have to pay this upfront so for £5,000 cover over five years, plus the £50 a month, they are forced to pay £8,000 at the start. On top of this they are charged interest.”
He added: “It’s no longer a question of profits. It’s sheer greed that’s driving banks and lenders to sell single premium cover.”
Mike Pendergast, IFA at Zen Financial Services, agreed: “I’ve had a number of clients tell me they had taken loans out without knowing they had PPI – it was automatically included in their quote.”
Following calls from the industry to stop the mis-selling of loan insurance, Clive Briault, FSA managing director of retail markets, promised a review into the general insurance sector.
He also told the Chartered Insurance Institute Annual Conference: “The PPI market has been the subject of bad press for many years. It was therefore only logical that we decided to look at this market shortly after taking on the regulation of the sale of insurance.
“In particular, we were concerned about the risk of poor or aggressive sales practices, unsuitable products, small print and complex terms, and the risks arising where these products are sold to consumers on the back of another transaction.”
