PPI or payment protection insurance has, over he past few years, been in the news for all wrong reasons. Introduced as an insurance plan that would cover monthly repayments following an accident, sickness or redundancy, PPI has emerged as one of the most poor value products to ever have been introduced in the UK financial market. The mis-selling of the policies and the fact that the banks made huge profits by selling these policies all made the PPI a controversial financial product. Further, the non-payment of the claims and the fact that millions were forced into buying an insurance policy they could never claim on have made this the biggest mis-selling scandal in UK history.
The sheer scale of the mis-selling, that made the banks and estimated £5billion a year for almost a decade, has meant that this is now also the biggest compensation scheme ever conceived. The title, previously held by the Miners Compensation Scheme which ended in 2004 and paid out £4.1billion over 13 years, has already been dwarfed the PPI compensation payouts which have already eclipsed £7billion over the past 2 years. Many analysts have estimated that the final bill will be in excess of £25billion – making this the biggest compensation scheme in the world, not just the UK!
The wholesale industrialised mis-selling of PPI by bank staff was driven by greed, with some reporting that they received commissions of upto 87% for selling the policy. Not only that, but they were also set very rigid sales targets which meant that if they did not push the product, their job was on the line as the banks were putting profit above all else.
To date, over 4.5million people have already made a claim for PPI compensation but according to recent figures released by the FOS, this represents just 10% of the total who may be eligible to claim.
The number of complaints being rejected by the banks is also alarming, as the uphold rate at the FOS is over 75%. In December 2012, the UK’s biggest bank, Lloyds Banking Group, released a statement saying that 50% of claims they were receiving were either “fictitious or bogus”. This may well have been a misdirect designed to discredit claims management companies and put people off making a claim. According to the FOS only 3% of claims are considered fraudulent or fictitious.
The number of people turning to CMC’s such as PPIClaimsAdviceline.com is also dropped from 76% in 2011 to 59% in 2012 – a drop of 17%, attributed to greater consumer awareness and a joint campaign by consumer groups Which? and MoneySavingExpert and the banks to discourage people from using CMC’s.