ABI warns on PPI unemployment claims

29/01/2009

Insurance covering loan repayments is becoming more important due to rising job losses, an industry body said today

The Competition commission's proposed ban on "point of sale" Payment Protection Insurance could carry "significant risks", the Association of British Insurers (ABI) said today.

A seven-day cooling-off period after the purchase of a loan before insurance could be bought from the same provider is to be introduced as part of a package of PPI reforms announced today by the Commission.

However, figures from the ABI suggest that unemployment claims on the loans insurance policies - which are designed to cover repayments when the policyholder suffers a sudden loss of income - have increased by 118 per cent over the past year.

General unemployment figures have been rising recently, thanks to the credit crunch and economic slowdown.

Nick Starling, the ABI's director of general insurance and health, commented: "The ABI believes that the point of sale ban carries significant risks for borrowers, mainly by leaving them unprotected at a time when unemployment cover has never been needed more.

"This massive [118 per cent] leap in claims shows that PPI is helping many people through a difficult financial period."

The Commission's reforms are expected to take effect in 2010.

Tags; Young Family Finances, Job loss, Recent Graduate Debt,

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