Banks stop selling single premium Payment Protection Insurance (PPI)

Some of the UK banks will stop selling single premium payment protection insurance by the end of January 2009. Alliance & Leicester,The Co-Operative Bank,Barclays, Lloyds Banking Group and RBS/Natwest are known to be axing single premium PPI sales. Single premium payment protection insurance gets bundled up with personal loans and is an expensive way of buying loan protection insurance. Invariably, the customer has no idea what protection they have bought and as the PPI premium is added to the loan, interest is charged for the duration of the loan.

The Financial Services Authority has welcomed the changes and states that many banks and loan companies plan to offer monthly paid loan insurance or PPI.

FSA’s Managing Director of retail markets Jon Pain says: “We are pleased these firms have stopped selling single premium policies and would expect other firms to notice these developments and review their own positions. A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately.”

Soon to be published rules will mean loan companies will be unable to offer PPI or loan insurance at point of sale. Consumers will then have the opportunity to shop around for PPI cover and find the best insurance cover from independent suppliers.

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