Plan to tackle insurance complaints
Updated on 11 September 2008
The Financial Ombudsman Services has called on the City watchdog to take action over the way Payment Protection Insurance is sold following a 10-fold rise in complaints.
The ombudsman service said it was currently handling more than 500 complaints a week about the controversial product, making it the single biggest issue consumers contacted it about.
It said the "significant proportion" of complaints that were being upheld, had made it think there was "widespread consumer detriment", and as a result it has written to the Financial Services Authority (FSA) about the issue.
A spokesman for the Financial Ombudsman Service (FOS) said: "PPI complaints have risen 10-fold in the past two years, and are now 25% of all the complaints we get."
PPI, which covers debt repayments if the holder is unable to work or loses their job, has come in for heavy criticism in recent years, following claims that it is overpriced and often mis-sold to people who will never be able to claim on it.
The ombudsman service said unusually for an insurance product, the complaints typically related to people thinking they have been mis-sold a product, rather than that they have been unable to claim on it.
Common complaints received by the FOS are that people did not realise they were taking out PPI when they were sold it alongside a loan or credit card and that the cost of the policy was not explained to them, particularly when they were charged a single premium that was added to their loan.
Other consumers have said they were sold polices that they would never be able to claim on due to their working patterns or medical history.
In writing to the FSA about the issue the FOS has triggered the so-called "wider implications" procedure, under which the FSA will consider if taking wider regulatory action is a better option than the ombudsman deciding individual cases.
The FSA said: "The FSA is reviewing the position in the light of the information it has received from the ombudsman service, and the information provided by its own ongoing thematic work on PPI. It will make a decision on possible measures to take on the basis of this review in due course."
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