People are paying too much for loans insurance, the Competition Commission has said.
Consumers purchasing payment protection insurance (PPI) on loans and other financial products are being overcharged by around £1.4 billion per year, the Competition Commission has said.
Imposing price limits on the insurance and banning firms from selling PPI at the same time as they sell the loans are both under consideration, following the results of the competition's investigation. The body also registered concern that PPI was often being sold as an "add-on" by loan firms, with customers potentially unaware that they might get better value by shopping around for the protection.
PPI works by meeting loans repayments if the borrower suffers a sudden event which leads them to lose their income. It has proved controversial in recent times, with some consumer groups criticising providers for miss-selling charging overly high premiums. Which? has even branded the PPI industry as a "protection racket".
Competition Commission deputy chairman, Peter Davis, commented: "The way PPI is sold as an 'add-on' to a loan or other credit product means distributors escape the pressure they should face from competing suppliers. Distributors don't appear to compete much with each other on either price or quality of PPI; neither do they appear to do much direct advertising of PPI to win customers from each other."
The commission began its investigation into PPI after originally being asked to do so by the Office of Fair Trading.
Compare loans via money.co.uk
