Difficult times for PPI
Datamonitor, the market analyst, has found that the number of people taking out payment protection insurance (PPI) has fallen.
During 2006, the premium value of PPI policies collected by insurers fell by nearly 4%, to £5.4 billion, and Datamonitor attributes this to both lower lending levels and bad publicity about PPI cover.
PPI provides debt repayment for people who are unable to work due to an accident, illness or the loss of their job.
It is usually sold to those taking out personal loans, mortgages, and credit cards agreements.
In recent times this type of insurance has been the subject of much negative publicity, including claims that the insurance is overpriced and being wrongly sold.
According to Datamonitor, some lenders charge as much as £25 a month to cover repayments on a £5,000 loan, over three years.
This kind of practice, together with criticisms from the Financial Services Authority and the Office of Fair Trading, has led consumers to view PPI negatively, and Datamonitor believes that the market is being considerably dampened as a result.
In addition, lower lending levels are also affecting sales, as premiums are generally calculated as a percentage of repayments.
PPI insurance sold alongside mortgages has increased slightly, but the rise has not offset declines elsewhere in the market.
Datamonitor expects the market to grow slowly in the short term, with premium income forecast to reach £6 billion by 2011.
Category: Health Insurance News
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