Payment Protection Insurance (PPI) is designed to cover payments on a debt – usually mortgages, credit cards or personal loans should you fall ill, have an accident or become unemployed.
Sainsbury’s Bank has the most expensive PPI out of the major lenders, costing over five times that of a standalone policy from an independent insurer. Sainsbury’s Bank charges a £2,984 to cover PPI payments on a £10,000 four year loan which if mis-sold is a hefty amount to pay out for what could turn out to be a valueless product.
PPI has steadily been developing a bad reputation and has been widely criticised by consumer groups as a money making racket for the banks, and it’s not hard to see why: A Competition Commission report released earlier this year claimed banks are making profits in excess of 900% from PPI, pocketing £1,200 from a policy that costs them just £20.
Because of the high profit margins on offer, many lenders have been trying to sell these policies too aggressively, or mis-selling them to people who they know won’t have a chance of claiming.
Mis-selling usually occurs when a policy is sold without the correct checks being made to ensure that the customer would meet the criteria for making a claim should they need to. Another instance of mis-selling is when information about the policy is somehow withheld or misrepresented. One example of this is the numerous instances of PPI being added to policies without the purchasers’ knowledge.
Source: Every Investor