For beginners, a Payment Protection Insurance or PPI is an insurance plan that covers credit card expenses as well as monthly loans. PPI serves as a protection for insured individuals who are incapable of fulfilling financial obligations due to sickness, injuries, accidents, and redundancy. In short, this particular insurance plan is very vital. Lately, however, it is becoming a common practice for many credit card and loan providers to sell their PPI to individuals who really do not need this type of insurance policy. Due to the growing number of mis sold PPI plans, many huge lenders are now facing sanctions such as fines. Also because of this, thousands of policy-holders have been doing PPI claims.
Now, why are PPIs often mis sold? PPI policies are often mis sold because credit card and loan companies gain more profit through this. They make more money by selling insurance policies alongside loans. Compared to this, an existing loan itself becomes less profitable. Currently, the number of PPI plans in the United Kingdom alone is about 20 million. Approximately, about 5 billion annually has been generated by various companies that are involved in this particular business. Usually, the cost of an insurance policy is far higher than the actual loan interest. The risk is definitely high in this field. This explains why many insurance company staff sell as many PPI policies as possible. A recent investigation conducted by the Competition Commission in a course of 15 months show insurers pay 78% for every 100 take on auto insurance, for instance. In contrast, only 15% goes to PPI loans. A huge share of the profit is hogged by lenders and not by the insurance firms.
Actually, there are many useful ways to identify a mis sold PPI. You could ask a company like UK PPI Reclaim to investigate it for you. A Payment Protection Insurance that has been added to your policy without your consent is a good example of this. Another sign is if you were told that an insurance policy is mandatory. Most of the time, an agent will also tell you that your loan will have more chance of approval once you decide on taking the insurance policy. It is also a common practice for unscrupulous insurance agents to misinform clients. They deliberately hide the fact that PPI is optional and cheaper options can be purchased from other sources.
These are some of the ways that will help you identify a mis sold PPI. To avoid problems concerning your insurance policy, make sure that the sales agent explains to you everything.