Pitfalls of payment protection insurance

The limits of payment protection insurance (PPI) should be made clearer to borrowers, according to a report from Defaqto.

It claims that British consumers are wasting up to £350 million on PPI policies every year, despite only two thirds of credit card services and a third of loan providers allowing customers to see terms and conditions before they sign up.

The company said that many could find themselves with a policy that does not cover what they think it does, and that a number of policies fail to pay anything at all.

Clearer wording in insurance documents and more graphics would help customers understand the breadth of their policy, the report said, arguing that the complex language used by insurers can often confuse consumers.

"The current situation is clearly not working as well as it could and is ready for an overhaul," said Brian Brown, report author and associate director at Defaqto.

"Insurers should conduct a proper customer demands and needs analysis before making a recommendation to take out this insurance. They should also spend more time explaining to the customer what information is required.



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