12 December 2005
A number of big firms could be hurt by the results of a planned investigation of insurance policies that promise to protect borrowers who can't meet loan repayments.
The Office of Fair Trading (OFT) is to launch a probe into payment protection insurance (PPI), which are supposed to protect borrowers who cannot meet repayments for some reason or another.
PPIs are controversial as, although banks make a lot of profit on them, OFT believes that consumers very rarely need to claim on them and those who do find they are not covered.
OFT chief executive John Fingleton commented: "PPI is a complex product, often bought almost as an afterthought. Borrowers may shop around for credit, but the complex nature of PPI and a lack of choice mean they are less likely to shop around for PPI."
One company that could be badly affected is Lloyds TSB, which earns around 14 per cent (i.e. £450 million) of its profit through PPIs, compared to an average of ten per cent that is received by most big lending banks.
Between 6.5 million and 7.5 million PPI policies are taken out in the UK each year, which amounts to £5.4 billion a year in premiums for banks.
Compare all UK personal loans at uSwitch.com and find the one to suit your needs.
© 2008 Adfero Ltd
Content for the uSwitch.com market news service is provided by a third party, Adfero Ltd. Whilst uSwitch.com makes reasonable efforts to check the reliability of this content, uSwitch.com does not guarantee the accuracy thereof or endorse the views or opinions given by Adfero Ltd, unless expressly stated otherwise.