The principal of Cumbria-based Eden Financial Planning said the PPI mis-selling scandal, which a spokesman for the Financial Ombudsman Service said last week may result in one of the biggest scandals in recent years, has confused consumers so much that they are avoiding buying insurance altogether.
Speaking after the FCA issued its latest figures on PPI compensation payouts – which reached £375.9m in March – Ms Bayley said that the scale of the problem had put many clients off, and it had become harder to show them the value of protecting themselves.
She said: “When you think about what PPI was, adding the insurance to the loan as a single premium, and then getting people to repay the loan and the insurance premium each month, is it no wonder that people have been put off.
“In one case I came across, a couple had borrowed £100,000 to fund a business, and the bank had added £24,000 in a single-premium PPI plan onto it. The premium was optional but they were led to believe they could not get the loan otherwise. They ended up being £124,000 in debt to Lloyds and, when we complained, we managed to get them £11,000 in compensation.”
She said that people are so nervous about ‘protection’ because of PPI and that, as a result, they are not protecting their lives, their income and their families.
Ms Bayley added: “Someone at these banks must be held accountable. No one person has had any criminal charge brought against them. Why not? You should not be able to hide under the coattails of a large organisation.”
Provider reactions
Mark Jones, head of protection for LV=, said: “People can be cynical about insurance products, and the PPI scandal won’t have helped. Advisers obviously play a key part in being able to educate those that seek advice, and it’s up to providers to help find a way of reaching those who do not.”
Steve Casey, head of marketing and propositions for Ageas Protect, said: “It is indeed a shame that there is the confusion between short- and long-term disability covers. It is not helped by consumers searching ‘income protection’ online and seeing PPI appear at the top of search lists.
