£60 million to be repaid to customers for ‘unfair’ insurance
Around a million customers are due to be refunded after lenders unfairly raised their premiums on their Mortgage Payment Protection Insurance (MPPI).
Around 2.1 million Britons have insurance policies to help them repay loans if they become unemployed or are too ill to work.
The Financial Services Authority (FSA) raised concerns about how fairly customers with insurance policies were being treated.
The main concern was that lenders were upping the price of premiums at a time when more and more people were struggling with redundancy and debt, thus making claims more likely.
MPPI providers have agreed to refund the cost of any price hikes in of MPPI during 2009 and also reverse any reductions to customer’s cover under the policies. The level of premiums and level of cover will be frozen for customers for the remainder of this year.
The chairman of the Financial Services Consumer Panel, Adam Phillips, commented:
“It cannot be right that firms change the terms and conditions of an insurance policy just as times get hard and people are more likely to try to claim on it.”
The consumer body Which? predicts that the refunds will affect around one million people and backs the FSA’s decision.
“We’re pleased that the FSA has taken action against firms who’ve effectively been selling people umbrellas, then trying to take them away at the first sign of rain” said a spokesperson yesterday.
Providers will be contacting customers if their policy is affected by the move and all refunds will be completed by the end of June 2010.
The FSA’s decision follows on from a similar move made last month where the FSA ordered banks to offer compensation to customers who had been mis-sold Payment Protection Insurance (PPI) which is often sold alongside unsecured loans and credit cards.
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