Here is a beginners guide into payment protection insurance and the claims process answering three of the main questions which need to be addressed in order to understand the PPI claims industry these are ‘what is payment protection insurance?’, ‘how was payment protection insurance was mis sold?’ and finally ‘how can you make a PPI claim?’. These tend to be some of the most asked questions for those who are just discovering the payment protection insurance scandal and trying to work out whether or not they have a policy that was mis sold and a claim that can be made.
What is payment protection insurance?
A payment protection insurance policy was a type of insurance policy which was sold with finance products such as loans and credit cards and other such finance that had monthly repayments. It was sold as a form of financial planning, providing important back up if the policy holder ever found themselves in a position where they were no longer able to meet their monthly repayments because of a loss in income primarily caused by an illness making it impossible for them to work any longer or through losing their position of employment. The policy cost a certain percentage of the total value of the loan, or in the case of credit card payment protection insurance policies there was a fixed sum charged for every £100 on the balance of the credit card so as you can see the higher your debts the more expensive your payment protection insurance cover would have cost. Despite the policy sounding like an attractive option and a great back up for those that didn’t have any savings or alternative income sources to make repayments if they didn’t have a job there were several problems with the policy. The main one was the incredibly strict criteria in place which prevented lots of policy holders from being able to make a claim and get their repayments covered. Further to this the very first payment protection insurance claim was made due to the very low potential benefit that came from such a highly priced product. Across the PPI industry as a whole only 20% of the value of the total sales of payment protection insurance was ever paid to meet the repayments it was created to cover which is significantly lower than industry rates for home, pet and car insurance.
How was payment protection insurance mis sold?
As well as the flaws contained in the actual insurance policy there were also massive flaws in the way that these insurance products were sold and as a result of this many consumers had their policies mis sold to them. The payment protection insurance policies were mis sold because the banks did not meet the requirements which were set out in their duty of care. Policies were sold as much as possible in order for the sales people to benefit from the high commission product and meet their targets in such a target driven environment and therefore even sold to those who were not suitable for the policies and the cover that it would have potentially offered. The failings of the bank led to thousands of UK consumers paying for products they were never going to be able to work. Those who were not suitable for the policies included those who were not in full time working employment that was permanent and then those who had suffered from an illness which could have got worse and resulted in them being no longer able to work and therefore need to use the cover. As well as failing to check whether the customers were suitable for the policy there were many instances where pressure sales tactics were used to sell the policies and this included forcing the customer to take out the policy and telling them it was a compulsory part of taking out the loan which they had applied for and making implications that the loan or credit card application would be rejected unless the policy was taken out. Finally another common way in which the payment protection insurance policies were mis sold was through not even informing that customer that they were being sold the policy. There have been many reported instances of customers not realising that the policies were included in their loan until years later when the awareness of this scandal was raised.
How can you make a PPI claim?
Making PPI claims is relatively straight forward and can be done through contacting the banks complaints department or simply using services such as PPI Claims Management. This will provide you with the experience and knowledge from a team of experts who have completed thousands of claims over the last few years and should be able to address any of the questions which you may find you come up with.