The Ongoing Scandal of Private Protection Insurance
Private Protection Insurance, also known as PPI, has found itself in the middle of a big scandal in the UK. In fact, there has been a record number of PPI claims in the country, and most of these claims are linked back to banks under the British Bankers’ Association. However, before you can understand what this scandal is and why it has affected so many Brits, you need to know what PPI is.
What Is PPI?
PPI is a type of insurance that helps protect you from large purchases such as debt repayment loans or home mortgages. This type of insurance makes sense because these are some of the biggest and riskiest purchases that consumers will ever make. It stands to reason that these kind of purchases should be protected by some kind of insurance.
PPI helps to protect borrowers in case they are not able to pay back their loans for whatever reason. For example, maybe they become sick or lose their jobs. PPI will help protect them. To get this kind of coverage, you have to pay a fee every month. If people have this kind of insurance on their mortgages or their loans, PPI is worked into their monthly payments.
PPI Compensation Claims Hit Record Number
Now that you know what PPI is, it is easier to understand the PPI scandal that has taken the UK by storm. Last year, PPI compensation claims hit a record 2.2 million. With a number this high, it was clear to the British government that some kind of scandal had taken hold of the industry. Shockingly, however, it is not consumers who are the main beneficiaries of these compensation claims but major financial institutions. It is believed that these financial institutions were mis-selling PPI to consumers. Some of the culprits include the Royal Bank of Scotland, Lloyds and Barclays.
Lloyds was discovered as being the worst offender with more than 391,000 complaints about mis-selling PPI. That being said, a number of other banks around the UK also received complaints from consumers during the first half of 2013. The Royal Bank of Scotland received nearly 290,000 PPI compensation claims during the same time period. Besides the Royal Bank of Scotland, Lloyds and Barclays, there were a number of other banks involved in this mis-selling scandal, such as HSBC, Nationwide and Halifax just to name a few big financial institutions.
Although there is apparently a problem in the PPI industry, investigators are still busy piecing everything together. A full list of companies and banks caught up in this scandal has yet to be released. It is also not known just how many fraudulent PPI cases were claimed during the first half of 2013. The only thing that is known for sure is that there is a problem, and it has to be handled or risks hurting the entire PPI industry.