One in five consumers are less likely to take out a payment protection insurance policy following the crackdown on the industry by the Competition Commission, MoneyExpert.com has found.
After an investigation into the selling process of payment protection insurance
(PPI), which unearthed a high number of cases of mis-sold payment protection insurance
, plans are being made which will ban the sale of the cover at the same time as loans, credit cards or mortgages are taken out.
Research from MoneyExpert.com has revealed that for a fifth of consumers this will seriously deter them from taking out insurance that would cover their payments should they find themselves unable to keep up with them due to illness or involuntary unemployment.
The Competition Commission has proposed that customers taking out a loan
, credit card
can buy PPI from another provider directly after the sale or can buy it from the same credit provider after a 14 day period, to prevent customers from being pressured into buying it at the time of sale.
There have been numerous instances of mis-sold payment protection insurance and a number of credit providers have been slapped with huge fines from the Financial Services Authority for their selling processes.
The Competition Commission estimates that consumers are being overcharged to the tune of £1.4billion a year under the current PPI rules.
But according to MoneyExpert's research, more than two thirds of British adults think that they should be able to buy PPI at the same time as taking out a financial product, with 42 per cent of those who are less likely to buy it saying that they would forget about buying it after the sale, and 20 per cent saying that they would not know where to get it from. A further 13 per cent said they would not have the time to shop around to get the best deal.
MoneyExpert is warning consumers that payment protection will become increasingly important in the New Year if it brings more unemployment as the economic crisis plays out and thousands of workers lose their jobs in the process.
The study showed that consumers share MoneyExpert's fears, with almost a third believing the PPI is a very important or fairly important thing to have in the current economic climate.
Despite the threat, however, just 26 per cent of Brits with personal loans have loan insurance
, 37 per cent of homeowners have mortgage payment protection
, and just 16 per cent of credit card customers have PPI, and are exposed to the risk of not being able to keep up with their monthly payments if their circumstances change. The average amount owed by Britons on credit cards is £2,007, while loan customers owe an average £9,465.
"The Competition Commission deserves support in its attempts to improve the sale of payment protection insurance in the UK but doesn't deserve support if its proposals lead to people missing out on insurance if they need it." said Sean Gardner, director of MoneyExpert.com.
"The likelihood is that too many people who want insurance and who ought to at least have the opportunity to consider it will lose out as a result of the proposal to ban the sale of PPI along with credit.
"The financial services industry has to some extent dug itself into this hole but it is up to the Competition Commission
to stop digging. PPI needs cleaning up to some extent but not shutting down."Make a mis-sold payment protection insurance complaint »
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