The idea that people could be denied cover if this type of cover was not available is a red herring. Monthly premiums work out much cheaper than a lump sum policy and it is much more flexible with free cover periods and tailored age-banded policies that work out even cheaper.
Braintree, Essex (PRWEB) October 13, 2008
The Finance and Leasing Association has been slammed as "grossly irresponsible" for supporting lump sum single premium Payment Protection Insurance (PPI).
Lenders' practice of rolling in protection insurance with the cost of the loan as a lump sum, often after putting the customer under pressure to take the insurance, was heavily criticised last week by the Financial Services Authority.
The Competition Commission, which is investigating the PPI sector, has just announced that it will force huge price cuts and recommend that lenders are not allowed to sell insurance at the same time as loans.
But in an article in last Monday's Times newspaper the director general of the Finance and Leasing Association, Stephen Skarloff, said that denying people the option of a lump sum premium could risk denying then cover should they miss a monthly repayment.
Sara-Ann Burgess managing director of PPI specialist insurer Burgesses said: "I am flabbergasted that the Finance and Leasing Association has had the gall to publically support the concept of taking out lump sum protection insurance with a loan when the regulator and other bodies have clearly expressed their dissatisfaction with the practice.
"The idea that people could be denied cover if this type of cover was not available is a red herring. Monthly premiums work out much cheaper than a lump sum policy and it is much more flexible with free cover periods and tailored age-banded policies that work out even cheaper."
Former deputy director general of the Association of British Insurers Skarloff argues that dispensing with lump sum premiums and offering only monthly premium policies will make it more difficult for people to protect themselves in the credit crunch downturn.
But Burgess added: "This is simple not the case and to suggest otherwise is grossly irresponsible. Lenders pressurise customers into taking out single premium policies because they know they are highly lucrative and they help boost the banks' bottom line.
"Customers should be aware that in these uncertain times, when banks and other lenders are running short of readily available capital, they will be putting even more pressure on their customer base to boost their coffers.
"Mr Skarloff has made it clear that they will continue to regard the discredited practice of pushing single premium protection policies as one way this can be achieved."