These people do not have consumers best interests at heart - they say they have - but if this was the case they would be applauding measures that give consumers greater flexibility and the option to purchase more extensive cover more cheaply.
Braintree, Essex (PRWEB) January 6, 2009
Moves to ban the sale of Payment Protection Insurance at the time a mortgage, loan or credit card is taken out should be applauded, not criticised, says PPI lobbyist Sara-Ann Burgess from Burgesses.
A growing number of firms are suggesting that the proposals put forward by the Competition Commission in November last year, calling for a 14 day ban on the sale of PPI alongside the credit provision, will cause greater financial hardship as consumers will forget to purchase PPI at a later date or not know where to source it independently.
Payment Protection Insurance pays out a pre-agreed monthly amount should the claimant lose his or her income due to an accident, sickness or unemployment, meeting loan commitments and other bills, dependent on the premium paid.
The Commission recommended a 14 day ban on credit providers selling PPI to their customers in response to an increasing number of consumers who have been 'duped' into purchasing expensive policies that do not meet their needs.
High Street lenders account for 70% of policy sales and their point of sale advantage has led to widespread anti-competitive practices resulting in more than 25,000 complaints being lodged with the Financial Ombudsman Service in 2008.
However, research undertaken by an online financial comparison site says two thirds of people believe they should be allowed to buy PPI at the same time as taking out a mortgage, loan or credit card and one in five adults - 6.5m people - will be less likely to purchase PPI if the Commission's proposals go through.
Sara-Ann comments: "This clearly indicates people are unaware they are being exploited by their lenders and credit providers who often hide the cost of their cover in the overall loan calculation. If customers were treated fairly in the first place, the Commission would never had made these recommendations. I believe greater financial hardship will be caused if consumers don't source PPI cover elsewhere."
Independent providers' policies have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income and often offer better benefits and support services
High Street lenders are widespread in their criticism of the Commission's proposals, as they fear it will cut off a profitable income stream, and comparison sites have also recently condemned these measures, citing it will lead to people missing out on insurance.
Sara-Ann continues: "These people do not have consumers best interests at heart - they say they have - but if this was the case they would be applauding measures that give consumers greater flexibility and the option to purchase more extensive cover more cheaply."
She counters: "I don't believe consumers will forget to purchase cover and lose out as a result of a 14 day PPI selling ban. In this economic climate everyone is becoming more financially savvy and looking to save some money by shopping around - why should it be any different with PPI? Anyone taking out a mortgage, loan or increasing their credit will want to ensure they have the means to meet their monthly commitments and be able to continue their payments should something happen to their cash flow."
Figures from recent online research show otherwise. MoneyExpert.com says only 26% of people have loan PPI cover, 37% have mortgage and 16% credit cards. Sara-Ann concludes: "All the more reason for providers and comparison sites to expend more energy on explaining the importance of PPI and signposting where they can purchase good quality, low-cost policies, independently. Getting a good deal is becoming a national mantra and the Commission's proposals encourage PPI purchasers to adopt the same principles they do for other goods."
Low-cost alternatives such as British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme.