It looks as if the Central Bank has finally taken action on the thorny issue of Payment Protection Insurance (PPI). I have been warning people for the last 10 years or more not to touch these policies, as not alone do they provide poor value for money, but also the claims experience has been terrible.
Essentially a PPI is a Policy that people took out attached to credit cards/personal loans/mortgages, which in theory, was supposed to meet their repayments if they became redundant/fell ill or died. The problem, not alone was the cost of these Policies, but also the fact that conditions for a valid claim were so onerous very few people had validated claims. For example, self-employed people were not covered under the redundancy section, for obvious reasons.
In fact, it was only some years ago that the Central Bank instructed all institutions to change their application forms when selling PPI. For many years you had to opt out on an application form, rather than opt in if you wanted this type of cover. Therefore a lot of people were sold a Policy they could never make a claim on, and in some cases, a policy that they never realized they had purchased.
It is unfortunate that it has taken so long here for the authorities here to investigate these Policies and has only been prompted by the fact that in the UK, the Financial Services Authority has forced their banks to repay billions to their customers for the miss-selling of these products. Recently the Central Bank, as a result of an investigation, instructed some institutions to make retribution to people who were miss-sold some of these Policies, which I believe only the tip of the iceberg. They are now conducting a wide ranging review of what could amount to circa 300,000 Policies, sold here since the mid 90’s. Considering the experience in the UK, the likely outcome is that Irish institutions may be forced to recompense a lot of these customers for miss-selling.
This is certainly one more scandal that the banking industry in Ireland could do without, but I have believed for many years that this was an “accident waiting to happen”.