Egg Banking fined by FSA for payment protection insurance sales

Credit card company Egg Banking has been fined £721,000 by the Financial Services Authority for the way it has sold payment protection insurance. The FSA found serious failings in Egg’s telephone sales techniques for payment protection insurance where the benefits of the policy were often overstated.

The FSA has reported that it found failings in 40% of telephone sales of credit card payment protection insurance (PPI) made by Egg between January 2005 and December 2007. Egg halted telephone sales of credit card payment protection insurance in December 2007 and has agreed to contact customers to provide a refund where appropriate.

Payment protection insurance should be considered mandatory

Payment protection insurance (PPI) is arguably the most important insurance product a home owner will take out. If we consider that for most people, their home will be the single largest asset they own, along with being the single most expensive item they ever purchase, then it becomes clear that protecting such a major investment needs to be approached seriously and with all due diligence.

We live in a world with a quickly deteriorating financial climate, in this day and age it is no longer safe to say that you will be able to find work for your entire life, or that you will be able to save enough money aside for a rainy day. If we also consider that three out of every ten people will face some form of illness which will leave them unable to work for an extended period, then we have to assume that insurance is now the only possible way to safeguard our homes, should we fall fowl of either loss of work or serious illness.

Payment protection insurance is specifically designed to ensure that our home repayments are covered should we find ourselves out of work and unable to secure a new job, suffering from a long term illness forcing us to lose our income, or being involved in a serious accident which renders us unable to work and secure an ongoing income. More specifically, payment protection insurance is targeted at protecting our homes should any of these mishaps befall us, with the insurance provider meeting our monthly mortgage repayments on our behalf for up to 24 months, although 12 months is the more usual timeframe.

A traditional payment protection insurance policy will protect the policy holder against accident, sickness and unemployment, although some people may be offered accident and unemployment only, or simply sickness and unemployment. This extra flexibility in policies is great for those people who already have an insurance policy in place which covers them for one of the three normal risks covered by payment protection insurance, as there is little point in taking out double cover, as only one policy would pay out at any one time.

Most usually, the payment protection insurance policy will contain two standard clauses, which are used to ensure that fake or erroneous claims are not paid out. The first of these is a 30 day deferment period, which states that no claim will be paid for the first 30 days from the initial date of the claim. The second clause is the back to day one clause, which states that all claims will be paid the monies owed for the 30 day deferent period once they become active claims.

Every home owner owes it to themselves and their families to ensure their property is protected should they find themselves on hard times through bad health or just plain bad luck. Speak to your insurance broker for more information about payment protection insurance.

Payment Protection Insurance PPI clients overcharged by £1.4bn

In June 2008 the Competition Commission stated that a lack of competition has lead to customers being overcharged by £1.4bn a year for their payment protection insurance.

The report found that the vast majority of payment protection insurance policies are sold at the same time as a consumer takes out a loan as most people do not shop around.

We have always offered a stand alone loan insurance policy for our clients. Rarely is any insurance which is sold with something else value for money. Many people are currently seeking compensation for loan policies which have been mis-sold and lots of people didn’t even know they had the cover as it was included within their loan repayments.

We know that you can save money each and every month by taking out an independent loan insurance policy rather than the one offered by the finance company. It is important to realise that the cover our policy offers may not exactly match your existing policy so it is important to read and understand all about the policy before you commit to buy.