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In the last year the ombudsman said it had been receiving "significant numbers" of complaints about this type of insurance.

While the service does not break down its data to differentiate how many complaints are received about each type of PPI, the Fos said the way the policies work and the range of benefits offered, can vary considerably from policy to policy.

When considering complaints about PPI the Fos said it would take the same long-standing approach as it had applied to the sale of other insurance products.

In the cases described the ombudsman disclosed the details of the particular policy, the individual customer's circumstances and the sales practices of the businesses concerned, all had a bearing on the outcome of the complaint.

In one example a customer claimed although he understood he was being insured it had not been explained to him that the policy was optional.

The consumer also said the form was filled in by the sales representative, who had not explained the cost or benefits of the policy to him, and had just asked him to sign the form.

After the customer complained to the ombudsman it was discovered the application form was completed in a different pen to that of the customer's signature.

The ombudsman therefore upheld the complaint and the company was ordered to repay the customers premiums plus interest.

A further case study revealed a couple had taken out a second mortgage, to be repaid in 15 years, to clear a previous 10-year loan with the provider as well as credit card debts and an overdraft.

The couple later discovered each time they had taken out a loan they had been sold a new payment protection policy, which they felt was contributing to their spiralling debt. The lender offered a partial refund but only if the couple cancelled their policy.

When the issue was referred to the ombudsman it became apparent that as the premium was added to the loan the couple were paying for the insurance for the entire length of the loan even though the policy only covered the couple for five years.

The Financial Ombudsman Service ruled the couple should not have been sold such inflexible policies and the lender should recalculate the outstanding loan amount if the PPI had not been included.

For more information visit www.financial-ombudsman.org.uk.