PPI

Hi, my name is Phil Jones I work for Which? campaigning to get people a better deal in the field of personal finance.

At Which? we’re really concerned at the moment about a certain type of insurance that I am sure you will have been offered at one time or another. You may even be paying for it now, whether you’re aware of it or not. It’s called PPI, which stands for payment protection insurance. I’d like to share some tips on how to make sure you’re not paying for insurance that’s unsuitable for you, or that you don’t need. I’ll also tell you how to get your money back if you’ve been mis-sold.

So, what is PPI?

If you think back to the last time you took out a personal loan, or bought something big on credit, the chances are you were offered PPI. The salesperson may have tried to convince you that you needed it to cover your payments, say, if you lost your job or became ill. They may have put pressure on you to take the insurance, or implied you needed it to get the loan. In some cases, they may have just added the insurance to your loan or purchase without really explaining it properly.

So, what’s the problem here? Surely it’s plain common sense to protect yourself in case you can’t afford to pay back what you have borrowed?

Well, Which? certainly recommends that you think about buying some kind of protection and you can find out about the different options from our website and magazines. One alternative is income protection, which can be more suitable than PPI for some people. You also need to be aware that you may be covered already by your existing insurance.

So, overall, we think PPI is often an expensive bad deal that can let down the people who need it. You’d usually be better off just saying ‘no’.

I’ll give you a few examples of what I’m talking about.

Firstly, there are lots of different exclusions with PPI. These can mean that if you have to make a claim it’s automatically rejected. The standard exclusions are things like pre-existing medical conditions, people on short-term contracts, or the self-employed. Lots of people never have the terms explained to them, which is called mis-selling, and it may mean you can get your money back. I’ll come back to that in a second.

Another problem with PPI is that it’s expensive. Adding it to a £7,500 five year loan could cost an extra £2,000 to £3,000. So, now you can see why all those salespeople were so keen to get us all on the PPI gravy train!

The lenders often lump the costs of the insurance on to your loan, and then make you pay interest on it. To make matters even worse, PPI usually only lasts for 5 years so if your loan is longer you’ll still be paying for insurance that’s expired! Does that sound like a good deal to you?

There are clear rules that firms and advisers have to follow when selling PPI. Basically, they have to explain exactly what they are selling and all the significant exclusions. They aren’t allowed to sell you something that isn’t suitable for you as an individual.

If you’ve been sold a policy, you can find a quick list of questions to ask yourself on the Which? website all about the sales process. If you can answer ‘no’ to one or more of these questions, then you may have been mis-sold PPI.

Remember: if you’ve been mis-sold – you may be entitled to compensation.

Making a complaint is easier than you might think. You need to write to the firm that sold your policy and explain that you’ve been mis-sold. We’ve got a template letter on the Which? website to help you do this, so it’s really simple.

And don’t worry if the firm turns you down. You can then take your case to the Financial Ombudsman. This is a free and independent service.

The people at the Ombudsman know all about the mis-selling that has been going on with PPI, and have helped resolve thousands of disputes about it. The website of the Ombudsman is www.financial-ombudsman.org.uk – I really recommend you have a look if you have any disputes with financial services firms. Good luck!