News that the FSA has negotiated a deal with the Payment Protection Insurance sector to offer consumers refunds on single premium PPI will not stop them being ripped off, according to Simon Burgess from British Insurance.
Burgess said he believes the FSA has not gone far enough in tackling the key issues - the regulatory body does not provide any guidelines as to the level of refund consumers should expect and neither does it give any indication when the overpriced single premium policies will be outlawed.
Burgess said:“This is a lightweight announcement - the FSA is saying consumers who have 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 have been ignored. No parameters have been set on the level of refund consumers should expect, providers could keep 99% of the premiums and they would not be falling foul of the FSA.
“Why hasn't the FSA agreed with providers that consumers will receive a refund on the interest they've paid as well as the premium and why isn't it on a pro-rata basis? Consumers who pay up front for a five-year policy and want to cancel after two years, should get three years worth of premiums back.”
Burgess said he believes the FSA should ban single premium policies: “These policies do not Treat Customers Fairly – which is the ethos of the FSA. In the mortgage sector, the cover lasts around five years, and then the consumer is contacted and asked to take out another policy with more expense. This is under the guise that medical conditions may change, but really it's a way of getting a further premium. Single premium mortgage payment protection is designed to provide short-term cover, so it's useless for a 25-year loan. Consumers mistakenly believe they have paid for something that will cover them for the lifetime of their mortgage and it won't.”
He concludes: “With Easter just around the corner many people will remember how Jesus was betrayed by Judas Iscariot. I believe the FSA is guilty of a similar betrayal of consumers.”
