Questions Raised Over Payment Protection Insurance
A Government watchdog has raised concerns over the way (PPI) is sold to consumers, stating it could pose a "serious risk to consumers".
A mystery shopping exercise carried out by the (FSA) uncovered poor behaviour from salesmen as well as some questionable practices in the way this insurance is sold.
FSA's managing director for retail markets, Clive Briault, said that could prove useful and that, when sold in conjuction with mortgages, companies generally kept to the rules. However, it was in other areas that practices were found to be questionable.
"This poses a serious risk to consumers because of the poor disclosure of product and price details; the possibilty that consumers may not be eligible to claim against their polices; and the fact that consumers may not be aware that they may receive little money back if they cancel their policies early," he warned.
This is of great concern to consumers as there are over 15m policies in use, with around 500,000 claims paid out last year.
The FSA study revealed that, of the 30 firms investigated selling PPI with credit and store cards, unsecured loans and secure loans:
- around half of the firms did not take reasonable steps to ensure prevent customers buying policies which they could not claim on or offered only limited cover.
- advice on PPI was usually poor, with most firms not having adequate systems in place to .
- Too many firms relied on product documentation at the expense of explaining the policy orally to the customer.
- product information, such as price disclosure, was too vague
- half of firms failed to provide adequate training for sales employees
Due to these startling discoveries, the FSA has advised firms selling PPI to smarten up their act, as it intends to carry out further research during the next financial year.
Consumer group Which?, commented: " The results of the FSA investigation are shocking, but not surprising, and confirm that many financial firms aren't complying with the new regulations that have been in effect since January this year.
"There's a real danger that many people have been sold unsuitable policies, are paying more than they thought or don't realise they won't get a lot of their money back if they cancel their policy."
feel that their is evidence of market abuse and as the FSA are unable to deal with all the issues concerned, their should now be an investigation by the .
