25 April 2007
As investigations into payment protection insurance (PPI) continue to generate media attention, one insurance provider has highlighted the fact that consumers who pay off their personal loan early could be losing out on reclaiming on redundant PPI policies.
When taking out a personal loan, providers can offer a PPI policy which covers the repayments for a set number of years - typically around five.
However, if the consumer completes their repayments before the five years has run out, many end up continuing to pay for PPI cover that they no longer need.
Simon Burgess, from independent insurance provider British Insurance, told The Liverpool Daily Post: "Consumers who pay upfront for a five-year policy and want to cancel after two years should get three years' worth of premiums back."
Commenting on the Financial Services Authority's recent crackdown on PPI providers, Mr Burgess claimed that while the regulator had made a start, there was undeniably more that needed to be done to protect the interests of the consumer.
"The FSA intervention is lightweight, saying that consumers with a 'nil refund' clause in their contract can get a premium refund if they cancel their policy and have not made a claim or they want to repay the loan early.
"But key issues are being ignored. No parameters have been set on the level of refunds consumers can expect and providers could keep 99% of the premiums without falling foul of the FSA," he concluded.
© 2008 Adfero Ltd
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