An urgent review into the sale of payment protection insurance is being called for by Liberal Democrat shadow Chancellor Vincent Cable.
This follows claims that industry regulator the General Insurance Standards Council is failing in its duty to protect policyholders by ignoring excessive commissions charged by brokers and other intermediaries selling these products.
Cable says: “There is clearly a serious consumer scam operating in the payments protection insurance market. The big banks and a small number of specialist brokers are taking advantage of weak rules which do not require disclosure of commissions to charge outrageous premiums.”
He has asked the Office of Fair Trading to investigate, calling the practice 'anti-competitive abuse'.
The most common form of PPI is designed to cover payments if mortgage borrowers lose their jobs through redundancy or illness. The cost of PPI on an average personal loan can easily double the total interest pay-able. Lenders are making a staggering £10m a day in premiums.
The GISC has also been accused of ignoring overcharging by member firms and even of being complicit in the rip-off as it stands to gain through increased levies from members selling this insurance – an allegation it strenuously denies.