Sam Dunn: The Post Office and PPI make for one tempestuous marriage

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The Independent Online

It's one of the most reviled financial products on offer to consumers, under investigation by the Financial Services Authority and the Office of Fair Trading.

And selling it is one of the UK's most trusted brands, eager to work its way into the consumer consciousness as a first-class financial services provider.

As marriages go, that of payment protection insurance (PPI) and the Post Office looks set for a rocky ride; more Richard Burton and Liz Taylor than Richard and Judy.

Tomorrow, the Post Office will start offering PPI as a "standalone" product for insuring your repayments on any lenders' personal loans and credit cards, instead of just selling it as an add-on to its own products.

Like all PPI plans, it will pay a monthly sum (up to £2,500) for up to a year if you can't work due to injury, sickness or unemployment. The particular selling point is that the Post Office policy will also, unlike most others, cover you for back injuries and stress - as long as you can provide medical evidence.

And, it says, its premiums will cost less than rival plans sold by high-street banks, while including a small element of life cover.

Brokers have reacted cautiously, welcoming the lower prices but highlighting all the old anxieties over this type of protection. They're right to. PPI's usefulness has repeatedly been called into question, while its potential for mis-selling and opaque exclusions has prompted regulatory inquiries.

Citizens Advice published a damning report called Protection Racket last year. PPI policies, it said, were difficult to compare because they came with different levels of cover, different exclusions and different prices. They were also poorly explained, so consumers didn't know what they were buying. Often, it wasn't made clear to those taking out policies that pre-existing medical conditions were excluded.

The Post Office says its new push into the financial services industry is a specific response to all this negativity - to put a "fair deal" in front of jaded consumers.

Yet it's hard to avoid the conclusion that the Post Office is exploiting its good reputation to gobble up a slice of the near-£6bn industry that PPI has become.

It could have made a much bigger difference by addressing the biggest problem with PPI: transparency.

In February, analyst Defaqto called for all PPI companies to publish claims data and show consumers the common reasons for claims being rejected - a move that would go a long way towards ridding PPI of its bad reputation.

(Standard Life is doing this sort of thing with critical illness policies to try to repair damage to the product's image.)

If the Post Office had got behind initiatives that promoted better understanding of the product it is selling, instead of simply promising better-value policies, we'd be making some proper headway.

By picking PPI, the Post Office is counting on being able to steer clear of the detritus of mis-selling accusations and investigations.

Good luck, I say - the Post Office will need it.

s.dunn@independent.co.uk

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