Huge surge in loan insurance complaints

The Financial Ombudsman Service (FOS) is being flooded with complaints about payment protection insurance (PPI) according to BBC News. PPI is meant to pay out if a borrower is unable to make their loan repayments due to illness or redundancy.

Consumer groups say the insurance is often mis-sold and doesn't pay out when expected. Because of this the Office of Fair Trading, Competition Commission and the Financial Services Authority (FSA), have cracked down on the lucrative PPI market.

The FOS reports that it is currently dealing with an "unprecedented" eight hundred plus PPI complaints each week. This figure has risen sharply in recent months due to the sudden increase in redundancies, and even accounting for the fact the the recession only really began to bite in the final quarter of the year, 2008's figures stand at 5.4 times 2007's. 2009's will almost certainly be higher still.

There are over 12 million PPI policies in force in the UK, accounting for about a third of all complaints handled by the FOS. An FOS spokesperson said: "We are upholding about 90% of the cases we deal with, and with one firm 100% of the cases. We have reported our concerns about some firms who seem to be systemically and deliberately mis-handling complaints."

If you think you have been mis-sold payment protection insurance, consumer group Which? has an online PPI mis-selling checker tool which makes the process simpler.

4 top insurance tips for the new year

As the credit crunch dips into a full on recession, choosing the right insurance cover becomes more important than ever. So today Insurance News Blog offers you 4 top insurance tips for the new year.

1. Avoid payment protection insurance
Number one in any list. Although banks and loan companies often try to force payment protection insurance (PPI) on customers taking out loans, they hide the true cost and fail to make it clear to their customers that taking out their cover is not mandatory. Lenders' PPI is usually vastly overpriced, and if you shop around you can always get a better deal.

2. Get your gadgets insured
Crime tends to go up in a recession, especially street crime so it's best to make sure all your desirable gadgets are covered.

Rather than insuring them separately get them added to your home contents policy. If you've acquired more gadgets over Christmas ensure that you are covered for the full amount.

3. Review your critical illness cover
Check whether the terms and conditions have changed, and whether it's still worth having.

In recent years these policies have become more and more expensive and with more exclusions. Insurers are also using unsavoury methods to avoid paying out. You might find permanent health insurance or an income protection policy actually represent better value.

4. Car breakdown cover
Especially in winter motor breakdown cover is a must. Make sure it includes at least these basic features: tow to garage, fix at roadside, take you and your passengers home, fix at home, and car hire or accommodation if your car cannot be fixed.

The following options are also desirable if offered: cover whilst driving on the continent, recovery for accident, theft or vandalism, and provision of a relief driver.

FSA fines Land of Leather over insurance selling

Struggling sofa retailer Land of Leather was dealt another blow after being fined £210,000 by The Financial Services Authority for selling payment protection insurance (PPI) without properly training their staff or having adequate monitoring procedures in place according to The Times.

Of the 6 firms the FSA has penalised during its recent clampdown on PPI sales tactics Land of Leather is the first high street retailer. Although it is the last thing the struggling furniture group needed they may consider themselves lucky to escape the £1,000,000 fine levied on HFC Bank.

PPI policies are touted by vendors as a safety net for customers, protecting repayments on loans and credit for a fixed term, but consumer groups say customers are misled about the cover and that the policies simply generate profits for the companies selling and underwriting them. Sales staff receive commission for PPI sales and often push customers into buying unnecessary cover.

The FSA concluded that as a result of Land of Leather's actions 58,000 customers were exposed to “an unacceptable increased risk of buying unsuitable PPI”. They estimated that between May 2006 and June 2007 the retailer generated in excess of £3 million from sales of the policies and set the level of the fine accordingly.

Land of Leather has suspended all PPI sales while it tries to bring its procedures into line with the regulator’s guidelines.