Lenders to Stop Selling Single Premium Loan Insurance

4th June, 2009

Banks and lenders across the UK will soon stop selling single premium payment protection insurance alongside loans - a practice that has faced a great deal of controversy from consumers and industry officials in recent years.

Payment Protection Insurance (PPI) normally covers debt repayments if the insured individual is unable to work due to illness or injury from an accident, or if they become unemployed. However, unlike regular insurance premium policies, which typically pay out on a monthly basis, single premium insurance policy holders pay the entire cost of the policy upfront. One problem with the single premium product is that the premium amount is often added to the debt being taken out, with many consumers claiming they were never even made aware of the move. So, single premium PPI products can lead to people paying significantly more debt interest.

The move to stop selling the PPI product follows an early-year report into the PPI market, issued by the Competition Commission, which outlined plans to ban single premium product sales by October 2010.

However, in February of this year, the Financial Services Authority (FSA) called on companies to cease selling the product sooner, issuing a deadline of late May. The FSA's managing director of retail markets, Jon Pain, wrote to the chief executives of UK banks and lenders with the request, attributing the urgency of the matter to "ongoing concerns" over the standard of sales. A number of big players in the UK banking and lending market stopped selling single premium insurance cover ahead of the Competition Commission's report, instead offering the regular premium version of the PPI product.

An FSA spokesman said in an interview:

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