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Since January 2005, the sale of Payment Protection Insurance (PPI) policies have been regulated by the Financial Services Authority (FSA).
Payment Protection Insurance is designed to cover you in the event of you falling ill, having an accident or losing your job which then prevents you meeting the payments on your loans or credit cards.
Below are a few points you may not be aware of:
The FSA’s rules are very clear with regards to what Firms and their Advisers selling Paymenty Protection Insurance (PPI) should do during the process of selling this product to you.Protection Claims
If Payment Protection Insurance was optional on the product you bought, this should have been made clear to you. The firm / adviser should also have made you aware of any significant policy exclusions and checked whether any of these exclusions would apply to you.
The firm / adviser should have made it clear how much the policy would cost and whether the Payment Protection Insurance would be paid for by a single premium, or by regular monthly premiums.
If it was a single premium policy, then the firm / adviser needs to have made it clear that the cost of the insurance would be added to the loan or finance agreement. The firm / adviser should also have made it clear that you would pay interest on the insurance premium.
If the insurance is due to expire prior to your loan or finance agreement ending, the firm / adviser should have made it clear that this was the case and (in the case of single premium policies) this would mean that you would continue to pay interest on the insurance premium after the insurance had expired.
If a firm / adviser tried to persuade you to take out Payment Protection Insurance by saying something along the lines of ‘we would strongly recommend that you consider taking out Payment Protection Insurance’, the sale has then moved from a ‘non-advised’ sale to an ‘advised’ sale.
If this happened to you and you did not receive a demands and needs statement (see below), then you have grounds for complaint.
There are certain additional requirements on firms and advisers that carry out ‘advised’ sales.
With an advised sale the firm / adviser must assess whether you need Payment Protection Insurance. This would involve completing a full fact which would enable them to consider your circumstances and any existing insurance you might have. The firm / adviser must also assess whether the policy, including its costs, is right for you.
If the policy does not meet all your needs, perhaps because of one of the exclusions, the firm / adviser must clearly tell you which of your needs the policy will not meet and must take this into account when considering whether to recommend the policy to you.
With advised sales, the firm / adviser must issue a demands and needs statement (Suitability Letter) to show why a particular policy has been recommended and why it is suitable for you.
Firms or advisers giving advised sales must keep records showing that a suitable recommendation was made, and recording any demands and needs that might not have been met.
