Why is it that PPI is so often mis-sold?
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Because it is very profitable for the banks! One simple reason.
Most of the profit from selling loans, mortgages and other credit finance agreements doesn’t come from the products themselves, but from the payment protection insurance sold alongside. There are around 20 million PPI policies in the UK, generating well over 5 billion pounds a year for the companies involved. Did you know it isn’t the insurer that reaps most of the reward? It’s the company selling the loan, credit cards or finance agreement. The cost of the insurance almost always makes the interest cost look small. So it is not surprising many believe this is the most over-priced financial product around. Worse still in July 2008, after a long investigation into PPI, the Competition Commission found these average insurance payout ratios:
* Car Insurance: 78%
* Home Insurance: 54%
* Mortgage PPI: 28%
* Personal Loan PPI: 15%
* Credit Card PPI: 11%
This means that for every £100 insurers charge for car insurance they pay out £78, on credit card PPI its j only £11, meaning it is a hugely profitable business. Most of this profit goes to the lenders, not the insurance companies. It means mis-selling cases are easy to win as it is well recognized that it is mis-selling and the good news is that you can get your money back. There have been thousands of success reports and many more still due.
PPI Claims handling companies
There are a number of excellent companies who now offer PPI reclaiming services alongside credit finance agreement claims. Most of them offer ‘no win no fee’ deals, and will take a percentage of any successful claim. If you’re picking a company, check out its reputation. NEVER pay them a penny, and try not to agree to one which will take any more than 25% of your compensation.
Or use www.PPIFREE.co.uk .
It completely free to claim and no money is deducted from your refunded PPI.
Try asking how long it has been handling PPI claims and for references from other satisfied customers, which it should be happy to do. This is potentially big money for you. For loan reclaims it could be many thousands of pounds. Yet calculating the actual amount is difficult and often unnecessary, as the lender will do it for you. However, it’s possible to estimate how much the insurance has cost, to get of how much you can reclaim (of course it then depends whether you have a claim or not.
How far back can you go?
Did your policy start in the last six years?
If your policy started in the last six years, whether you’re still using it or not: Reclaim and ask your lender for a copy of the paperwork if you no longer have it.
- Is your policy older but still active or ended in the last six years?
If your policy started over six years ago and you are either still using it, or it ended within the last six years: Reclaim and ask your lender for a copy of the paperwork if you no longer have it. Your chances of success may be reduced if you have been aware of the mis-selling for some time, you have already complained or your account is very old.
- Is your policy older?
If your policy ended over six years ago and you have the paperwork: Reclaim, although your chances of success are reduced, as it will depend on what you can remember about the sale.
If your policy ended over six years ago and you do not have the paperwork: It’s unlikely there will be records and unlikely the reclaim will be successful.
Estimating how much the insurance cost you.
The amount of insurance is different from product to product.
Loans
Obviously if you know what the insurance costs per month, simply multiply this by the length of the loan to work out its cost. If not, you can do a rough estimate as follows. Work out the total cost of your loan, simply by multiplying the monthly payments by the loan length and then take 15% off the total. This is a typical insurance cost (although it can be anywhere between 10 and 30%).
Cards
The estimate is more difficult on cards as the amount you owe changes each month. There is a way to get a very rough idea. Most card insurance plans cost roughly about 80p per month per £100 of outstanding debt. We can therefore work out that for every £100 of debt you have averaged over a year, you’d pay £10 in insurance. In other words, roughly 10% of your outstanding debt in insurance each year. If you want to take this a step further and calculate the exact amount that may be owed, this is possible provided you have the paperwork. Though again, it’s not actually necessary as if the lender agrees the reclaim it should do it for you. To do it correctly you will need some paperwork:
* Loans: To do this calculation you need the original loan agreement. This should detail the loan amount, the insurance amount and the type of policy that you have or had. If the amount is monthly you need to calculate the total cost over the life of the policy.
* Cards: Here you need copies of your statements over the time period. Each month, the cost of the insurance should be detailed, so just add that up month by month.
If you don’t have the paperwork
If you want to check the costs and don’t have the paperwork, send a letter to your lender, requesting a full breakdown of your account, specifically including the cost of the insurance. If you ended your agreement over six years ago, your lender may no longer have this information as it only has to keep records for six years. If no one has a record of the account, a reclaim is unlikely to be worth pursuing. Otherwise your lender has 40 days to send you the info.
If it is late you can follow up your letter with a phone call and then report it to the information commissioner as you have a legal right to this information under the Data Protection Act.
