Payment protection insurance, commonly known by the acronym PPI, is an insurance product that ensures the repayment of an overdraft or a loan. It is useful when a borrower is deceased, disabled or loses the means to continue repaying the instalments. A PPI is an add-on that comes embedded on an overdraft or loan at the sale stage. It accompanies almost any loan product you can think of; mortgages, car loans, payslip guaranteed bank products among many others. PPIs are set to cover the minimum overdraft for a pre-set period of time after which the payments have to restart. At this point, the borrower will have to make fresh repayment arrangements unless in cases where borrowers are deceased. What happens when the loan term ends, can PPI claims be successful?
Of all insurance claims, PPI has the largest number of rejected claims. The general reason to support the rejections is an underwriting anomaly; many practitioners treat PPI as a general insurance and do all the underwriting procedures at the sale stage. Another problem is with the customers who pick PPIs with loan product while totally oblivious of its nature. Market inquiry has also shown that customers do not question whether they are eligible. As a product meant to assure repayment instalments, most lenders sell it with the procured product. In the United Kingdom alone, there are about 40 million PPI policies. Now that is not surprising, the fact that 40 per cent of the holders are ignorant of the policy obligations.
PPI has been mis-sold for a long time now; bad still is that investigations into such mal-practice have been bungled. The mal-practice is driven by the huge commissions from sales. All the same, PPI claims are possible; the claim has to be initiated by the client. Lenders have the obligation of investigating and it is not just about the customer reclaiming the amount paid but the interest accrued too.