Up to 70,000 consumers who believe they were sold inappropriate or overpriced payment protection insurance (PPI) are to put in claims for compensation, something which insurance network CETA believes will help to rid the market of mis-selling.
The insurance network also believes the poor press received by this section of the loan cover market has unfairly caused mortgage payment protection insurance (MPPI) to also bear the brunt of the adverse publicity.
“PPI customers who were mis-sold cover or overpaid have every right to get their money back,” says CETA managing director David Quick.
“Figures by MoneySavingExpert.com suggesting that PPI sales generate £5 billion in premiums each year, with only 20 per cent paid out in claims, doesn’t help the cause of brokers who have scrupulously avoided overly aggressive or underhand selling tactics.
“Nor are the media reports of PPI mis-selling likely to distinguish it from MPPI, which can boast a far superior track record with nine out of 10 claims paid and an acceptance rate in the region of 83% to 85%.”
He adds that growing campaign for those banks and building societies found guilty of profiteering from PPI will be a positive force, if it accelerates the pressure for them either to clean up their act or beat a retreat from the marketplace.
“But the trouble is that many of the guilty parties don’t seem to care. With a total of 20 million PPI policies in force, they can easily assimilate a few million pounds in fines or compensation payments. Rather like the financial penalties recently meted out to BP, the banks and building societies can treat it as no more than a small slap on the wrist.”
The compensation campaign should succeed in alerting people to the fact that buying PPI from a lender often proves far more expensive than buying it as a stand-alone, which can offer premium savings of up to 80%. David hopes that if the compensation campaign also succeeds in “naming and shaming” the worst offenders in PPI mis-selling, consumers can avoid them in future.
Borrowers may also come to recognize the worth of broker sales of regular premium prime mortgage PPI, which the Financial Services Authority watchdog has confirmed “is most likely to meet its requirements.” But David adds that it’s regrettable the renewed adverse publicity for the whole loan cover industry comes just as consumer interest in MPPI and the protection it offers is likely to increase.
“Many households are likely to be hit by a double whammy this winter as food and fuel prices rise and huge numbers coming off fixed-rate mortgage deals face a big jump in their monthly payments,” says David.
“With it looking increasingly unlikely that any cut in the Bank of England base rate will come before Christmas, even homeowners who don’t suffer the misfortune of sickness or unemployment will have their budgets fully stretched in the coming months. Many will want access to a fairly-priced and comprehensive MPPI product available should misfortune strike.”
Among these is CETA’s own ‘next generation’ MPPI product developed in partnership with Cardiff Pinnacle, which provides an industry-leading claims and ‘back to work’ support service. This age-related cover costs from £2.20 per £100 monthly mortgage payment, more than 60% lower than many high street mortgage companies would charge for an inferior product.
“Although the stream of bad publicity for PPI may obscure the fact, there are solid, fairly-priced MPPI products available and independent advisers ready to guide consumers in finding one appropriate to their needs,” adds David. “Homeowners should bear this in mind, even as the PPI compensation campaign continues to build up a head of steam.”
