Sam Dunn: It was high time they put the boot into PPI
Payment protection insurance is a decent idea, but it has been debased by lenders' greed
Sunday 11 December 2005
Bullying is vicious, and should be stamped out at all costs. Well, nearly all.
I allowed myself a small smile last week at the sight of a hobnailed boot being put into payment protection insurance (PPI).
Call me a sadist, but the kicking suffered by the insurance - sold to protect the repayment of personal loans, credit card bills and mortgages if you fall ill or lose your job - and those banks and lenders that sell it, is a treat.
The Office of Fair Trading (OFT) decision to subject PPI to a forensic examination (see news, page 23) couldn't have come at a better time.
Separate inquiries by the Financial Services Authority and Competition Commission have delved into the workings of these insurance policies; the extra pressure from the OFT should squeeze PPI until it squeaks.
Citizens Advice published a 60-page report in September, called Protection Racket, in support of its "supercomplaint" to the OFT about PPI, branding it a "misnomer".
If I sound vengeful, it's because I mean to be: PPI has been one of the meanest products sold to consumers over the years.
It's a shame that it's come to this since the concept of PPI - a fallback in financial adversity - is a decent one. But in the hands of the financial services industry, this noble idea has been debased by greed.
Exclusions to PPI policies that make a claim invalid are, for most, the biggest bone of contention.
The Citizens Advice report highlighted how common policy exclusions included being too old; being off work with a "bad back", the most common of work illnesses; mental health problems including stress; and being self-employed or a contract worker.
As lenders had different policies and exclusions, comparing policies was a fiendish task, it said. This is unsurprising; the less a customer knows about the finer, less friendly, points of a financial product, the easier it is to sell.
Other dubious sales techniques included telling applicants they wouldn't be approved for loans unless they took out PPI (so providing commission to the sales rep) or using bleak language to outline worst-case scenarios. This is PPI at its worst, leeching off customer insecurity for a fast buck.
At their best, the policies can make a difference; lenders can always find someone who made a valid claim and is now enjoying a financial cushion. But the gross inconsistencies in the product need sorting as soon as possible.
The OFT's announcement - one in the eye for PPI - hasn't come a moment too soon.
My only fear is that, whatever the OFT inquiry discovers and orders to be changed, the banks and other lenders will simply - and surreptitiously - try to recoup any lost revenues elsewhere.
Vigilance is vital.
Banana skins don't come much bigger than those choice proposals for the self-invested personal pension (Sipp).
The Chancellor decided last week to abandon plans to let wealthy savers put holiday homes, fine wines and even their own homes into a Sipp, leaving everybody bruised.
But while many in the financial services industry were open mouthed, plenty of faces wore smiles instead.
The tax relief may have been imaginative but it was also indulgent, giving a break to the wealthy, who really didn't need it.
Resources should now be diverted into plans and products to encourage all of us, not just the well-off, to save for our futures.
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