UK banks withdraw from selling PPI – now what?

July 25, 2010 - PRLog -- For me it hasn't been a surprise that at last almost all major banks decided to withdraw from selling payment protection insurance. There was a great publicity about policies being mis-sold in the last few years and the FSA was under a huge pressure to tighten the criteria and change the policies, procedures and the whole regulation.

What is in it for you?
If you do have a PPI policy on your loan or unsecured finance, maybe mortgage, and you are feeling that you were mis-sold the policy there are greater chances to make a successful claim. But if you are thinking about taking out payment protection, or you think that your policy “did the job” and perhaps it did pay out on claim, you should not be worried. There are a couple of companies that are specialized on this type of insurance, and still sell the policies, that might cover all your credit commitments, for just the fraction of the price. By the way: if you have already taken out a policy and are happy with it, nothing is going to change, the insurance will still cover you.

What is in it for the FSA?
Well, the FSA has been criticized a lot with regards to its vague regulations and basically letting banks do whatever they wanted. Remember endowment policies? Did they react in time? No. They had to receive an enormous amount of complaints before they acted. Do you remember Bank charges? There was never a clear regulation around the products therefore they failed the banks and failed the consumers as well. And now, with regards to PPI: the truth is: banks could only do what was allowed, and they still had to adhere the regulations that were obviously not tight enough. But they were continuously checked by the FSA, which agreed with their procedures prior to receiving a huge amount of complaints again.

What is in it for the banks?
Although the largest financial institutes have withdrawn PPI products, the reason is only to wait until there is a clear regulation around it. At the moment FSA has tightened the criteria so much that the it is not worth it for the banks to sell these products. They need to adjust their training, policies, products to the new market conditions, but you bet they will be back. PPI has made them a lot of money, although they have lost a lot in the past two years of that profit because of the number of people claiming on mis-sale. Now, I do not think that banks have mis-sold every single policy, they still had guidelines and procedures, but it is actually much easier for them  to refund the premium than, investigate the complaint. Just imagine 1000 complaints coming in daily, you need trained personnel to investigate it, if it was taken out on the phone, listen to 1000 15-20 minute call, write correspondence, follow up, etc.... It is actually not worth it, especially not at the current state the banks are at the moment.

The future...
I think banks are going to return to selling PPI as soon as possible, as there is big money in it. How soon, it will depend on the FSA regulations and how much investment and work they will require from their part. Until then, you have the option to take out independent policies that covers your monthly commitments.

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