Review of pay insurance policies may lead to refunds
Move by the Central Bank on PPI products could result in financial institutions being forced to pay back hundreds of millions of euro to consumers
STORM CLOUDS are gathering over the payment protection insurance (PPI) business in the Republic. Banks and other firms which sold the insurance to consumers who could do little or nothing with it may soon be forced to issue hundreds of millions of euro in refunds.
Yesterday afternoon, the Central Bank announced it had demanded seven companies doing business here to carry out a “comprehensive review” of the sale of such policies going all the way back to 1997. Such a review is long overdue.
A Central Bank review of claims processing for PPI policies undertaken in 2009 found that, where a claim was declined, it was generally in accordance with the terms and conditions of the policy sold.
However, it also appeared that consumers were often not aware of the exclusions attaching to their policies, or, in some instances, it appeared they may not have ever been able to claim.
Where it was found that claims were declined due to the employment status of the claimant, the Central Bank felt it was reasonable to question why the employment status was not picked up at point of sale.
At this point the seller should not have offered the product or at least alerted the consumer that they may be eligible to claim for the health/sickness benefits but not the unemployment benefits as is the case in some policies.
The initial Central Bank investigation was not carried out in isolation. PPIs can be made look very attractive by offering to clear outstanding debts on credit cards or other loans in the event that a borrower falls sick or loses their job and are unable to cover their debts.
But they have been dogged with controversy in the UK in recent years after widespread mis-selling was uncovered. As a result of sharp practices there, millions of consumers were issued with billions in refunds.
The customers in question were mis-sold expensive and frequently useless insurance policies, which were hugely profitable for the banks. The policies were sold to the self-employed, but the bank salespeople failed to inform them that they would never be able to claim against becoming unemployed.
Policies were also sold to people who subsequently fell ill as a result of a pre-existing condition, which invalidated their insurance.
In some cases, customers were denied loans or mortgages unless they took out payment protection insurance. Some were unaware they were paying for them.