On of the major players in the Credit Crunch which had to be bailed out by the UK taxpayer and contributed to the current deficit – Lloyds Banking Group – has announced today that it has set aside a £3.2bn provision for claims from clients that they were mis-sold payment protection insurance (PPI), which accounts for the bulk of the £3.7 billion loss it has reported.
Lloyds Bank has decided to settle all the PPI misselling claims after UK banks lost a High court judicial review called by Barclays and others over PPI claims compensation last month.
Payment protection insurance also known as ASU, Income Protection Insurance and Mortgage Protection Insurance, was sold by the large banking corporations at inflated rates to cover in particular credit cards, personal loans and mortgage repayments if income ceases or falls because of accident sickness or unemployment.
Since 2009 thousands of Uk complainants have received compensation because their policies were mis-sold. Missold, because they were sold policies that were either not explained to them, did not cover them because of certain exclusions or in the majority of cases was only taken out for fear of not obtaining the loan.
The Financial Services Authority (FSA) published guidelines last year which said banks should contact all PPI past policyholders to ask them to complain if they believed they had been mis-sold PPI.
Insurance Blog is pleased that the UK Government owned bank is leading the way on payment protection insurance compensation claims. The other banks will now have to follow suit.
It is only fitting that the big banks who were the main offenders in the misselling of PPI should be made to pay and not the hard pressed insurance industry, and particularly the Insurance Brokers, that has so far footed most of the bill with ridiculously high FSA fees, which in many cases has created barriers to entry for the UK Financial Services market.
On a footnote if the Bank of England keeps Interest Rates at the same level today, it will be a good day for the UK Public.