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Archive for tag: PPI Problem

Was it PPI or the Way it was Sold That Was the Problem?

There are has been a lot written on PPI, the theories behind why it was mis-sold and for so long. There has been even more written on why banks and lenders were so reluctant to admit wrong-doing and start paying compensation to their customers.

But it begs the question - was it the product itself or the way it was sold?

PPI - Debt-Specific

Payment protection insurance was a debt specific product. This means that it was applied to one product at a time. Hence, if you have two credit cards and a loan, you would have three separate PPI policies.

In some ways, if you only had one account or product, it would make sense to have one insurance product on it.

But, it was a shallow product that didn't have much depth to what it would cover. In other words, the possibility of making a claim against the policy was incredibly low. Only 15% of claims that were made paid out. This is an incredibly low pay out figure, especially when compared to other insurance products.

Commission Based Selling

PPI was sold by bank staff to their customers. What was driving the high number of sales was the commission that bank staff would be entitled to if they hit and exceeded their sales targets.

What took over was the drive to meet goals and numbers, not what was right for the customers. Bank staff made commission that handsomely supplemented their salary, as did their supervisors and department heads.

Profit Driven Sales

For the bank or lender, more sales of PPI policies meant more profits. Did you know that in some cases, up to 80% of the cost of a PPI policy was profit for the bank?

This meant that they too realised that the mass selling of PPI policies was only a good thing for them; it meant bigger and better profits.

A Combination of Both

The product wasn't great. It cost a lot of money for very little cover. It was a shallow policy, with no real depth to it and this meant very few people who had PPI were eligible to make a claim.

You would have found a policy that was much better and much cheaper too.

The fact that it was driven by sales, profits and commission and not the needs of customers is also a serious issue.

It meant that people who had no hope of making a claim on their policy carried on paying for it. they assumed that their bank or lender had their best interests at heart and as well as protecting their own investment, they were protecting them as customers too.

This was not the case. Staff and banks were driven by the large profits they could make on PPI sales and this clouded their view.

Isn't it time you claim PPI compensation?