Assessing risk is something most of have to deal with during our lives. Risk is normally measured by looking at the likelihood of something happening and the effect it has if it does.
For example, if you take out a mortgage you may want to consider the risk of not being able to keep up the repayments. This could be due to losing your job or getting sick or having an accident and not being able to work. Assessing the probability of anything happening which could affect your ability to keep up with mortgage (or any loan) repayments is very difficult.
The other part of your risk assessment would be concerned with the impact of illness or losing your job and not being able to meet your mortgage payments. As this might lead to you losing your home, the outcome is obviously, potentially very serious. So, how can you cover this serious risk?
The answer for a great number of mortgagees in the 1980’s and 90’s (and consumers with credit card debts and other unsecured loans) was to take out Payment Protection Insurance or PPI. So what should have happened was that PPI policies taken out by people who later fell ill or lost their jobs paid their mortgage or loan repayments and everyone lived happily ever after. What actually happened was that banks, credit card companies and other loan providers had mis-sold PPI and made huge profits.
In 2004 the Guardian newspaper reported that one prominent high street bank had made as much as 20% of all its profits through selling PPI. In the following year, Citizens Advice presented evidence to what was then the Office of Fair Trading that PPI was “very expensive, mis-sold to people who cannot claim on it, and designed to exclude many of the most common situations that can lead to debt”.
At that time it was estimated that twenty million policies had been sold as part of what Citizens Advice described as “… a £5 billion protection racket.” Later the Financial Conduct Authority (FCA) estimated that three million people had been affected. However by 2016 twelve million customers had received compensation, totaling £24.2 billion.
Just over a year ago, the FCA decided enough was enough and called time on what has developed into a claims industry. If you have ever bought PPI and feel you were in any way misled or pressurised into doing so and want to make a claim then you must submit it by 29 August 2019.
You can also claim if the company which sold you PPI received commission it did not tell you about.
If you’re thinking about taking out Payment Protection Insurance or you’re offered it when you take out a loan, you should think very carefully about whether you really need it. PPI can be very expensive and it may not be suitable for you and you may have other ways to cover the loan repayments should the need arise.
You can get more information on PPI as well as help and advice on Benefits, Work, Consumer Issues, Relationships, Housing, Law and Rights, Education, Discrimination, Tax and Healthcare by:
- calling 0344 848 7969 to speak to an assessor or make an appointment to talk to an adviser face-to face. (calls to this service cost the same as calling 01 and 02 numbers included as part of a mobile allowance or a landline call package.
- visiting https://www.citizensadvice.org.uk/ to access our comprehensive range of information and advice,
- or follow us on https://twitter.com/waverleycab