Payment Protection insurance (PPI) is in the news again with the UK financial complaints service, the Financial Ombudsman Service (FOS) reporting that its first quarter was the busiest ever with over 81,000 complaints – more than double the number received in the same period 2010.

Payment protection insurance, such as mortgage protection insurance, was the main reason for this substantial increase and the FOS have been receiving on average over 900 PPI cases each day.

Banks and others are already reporting record numbers of new complaints and it will be some time before we see the impact of those on our figures. So it’s difficult to tell whether we will be seeing still higher numbers yet – or whether the figures will now start to decline.

Tony Boorman, principal ombudsman at the FOS said, “When we come to publish the results for the next quarter, I expect the position on PPI will have changed again.”

“With complaints-handling rules ‘waivers’ agreed by the Financial Services Authority, the rate of new PPI cases has slowed – for the moment at least. ”

And the efforts by many banks to clear the backlog of cases that has built up should see record volumes of cases closed, and high uphold rates.

Bad Banks

Unsurprisingly, the bulk of complaints have concerned PPI after the banks lost an appeal on a ruling to pay back the policies in the High Court earlier this year. The period also saw both the High Court decision on the PPI judicial review and the decision by the British Bankers’ Association not to appeal that decision.

Figures from some of the banks this week have revealed that the PPI saga is having an adverse effect on their balance sheets.

Barclays said that its profits had fallen by 33% compared to the first six months of last year, with a £1 billion provision for PPI claims largely to blame.

Results from HSBC also showed the bank has put almost £270 million to one side to deal with customers’ claims.

Lloyds Banking Group has also previously revealed that it has put £3.2 billion aside to pay possible claims. PPI was sold by banks on unsecured credit products such as loans, credit cards and some mortgage products.

Santander is the latest bank, and the last of the  big banks to cave in and to set aside money to pay the compensation bill. Santander owns Abbey Alliance and Leicester and Bradford and Binlgley has set aside £543 million for PPI  claims.

In April, the banking industry lost its High Court challenge to new rules on the sale of PPI.

Among other things, the rules require sellers of PPI polices to review all their past sales to see if their customers have a claim for mis-selling, whether or not they have actually complained.

While the legal case was going on the banks put on hold tens of thousands of fresh PPI complaints that came in.

Santander was second, behind Barclays, in the list of most complained-about financial institutions during the second half of 2010.

Related posts:

1. Insurance Brokers Pay for UK Banks PPI Claims
2. Payment Protection Insurance Claims cost Lloyds Bank £3.2 Billion
3. What a bunch of Bankers! UK Banks challenge PPI ruling

The guys over at the tradesman insurance quotes comparison site tradesman-insurance.com sent us it!

Watch!

Insurance Blog – keeping up the crusade against rip off banks that we are all paying for now in higher taxes and soon to be higher interest rates!

Someone should tell Cameron that he could get rid of the so called deficit if he sold the Banks that this Country owns!
However it suits his political purposes to line the pockets of his banking prep school chummies with Government money is the form of treasury bonds………

Related posts:

1. New Year Recession Fears
2. UK Unemployment hits record heights
3. UK Government CON DEM The FSA Insurance Regulator

Reading through the Insurance news this week you will find multiple stories from Brokers moaning about the ‘ridiculously’ high fees they are being asked for in order to trade. In some cases the fees have risen three fold on last years costs and many small operators are threatened with going out of business. In some cases the fees represent 20% of their income.

The reason, the FSA’s Financial Services Compensation Scheme to which all members have to contribute.

In the last couple of years the FSCS has paid out over a billion pounds in damages for claims to individuals who were mis-sold payment protection insurances (PPI), such as mortgage protection or loan protection primarily by – The Banks.

Yes those good old bastions of the British financial system, the Banks and not forgetting the Building Societies who were equally as guilty, had been systematically robbing their customers for years, who took out PPI on the back of their mortgages, loans and credit cards .

On average these institutions were charging in excess of five times the premium for the same cover that could be had from an independent supplier or Insurance Broker offering mortgage protection.

They got away with it for years because you and me the UK public were initially only too keen to sign their agreements to secure the loan!

When they finally got found out, thanks to the lobbying of Insurance Brokers, The FSA fined them all a pittance!

Now there’s a shortfall in the amount of cash needed to foot the bill, and guess who’s got to pay?

You got it – the very same Insurance Brokers who pointed out the misdeeds of the UK Banks and PPI  in the first place.

How mad is that!

So what do the FSA do and what does the Insurance Broker get for his fees?

Well from our experience absolutely nothing, until today that is, when a letter came in the post advising us to ‘cold shoulder’ this investment company we’ve never heard of on penalty of being struck off the register……

Meanwhile the UK Government owned Lloyds TSB Group owners of Halifax and Bank of Scotland have announced today that they finally will not be pressurising their customers into buying their PPI products!

Insurance Blog is of the opinion that the sooner the FSA is removed and replaced by another bunch of bureaucratic pen pushers the better and worse for us all………..

This time please keep the Bankers out of Insurance!

Related posts:

1. Small Insurance Brokers at Risk as Banks fail
2. FSA orders GBP 60 Million Mortgage Protection Insurance Repayments
3. What a bunch of Bankers! UK Banks challenge PPI ruling

The Insurance Industry which is at the top of the triangle of the money market distribution, is renowned for it’s slow reaction to change.
You’ve only got to ask a dynamic young business analyst or insurance product underwriter how difficult it is to implement solutions that would ultimately bring an Insurance Company competitive advantage……
Insurance Companies are naturally cautious and are able to absorb external change over time through their ability to control the provision of products and the levels of competition within the market.
They do this by controlling the rates at which they sell their products to the retail market through various differing distribution channels.
The rates that Insurance Companies set for Insurance are typically determined by the levels of profit that the investment side of the company is making.

This level of profit is ultimately determined by the Base Interest Rate set by the Government above which the Insurance Companies can not only sell you products with hiked up rates such as mortgages and pensions, but much more importantly make the bulk of their profits from reinvesting your money in very large chunks, for guaranteed long term profits.
For example ,the current Government borrowing deficit of 165 billion pounds sterling has mostly been underwritten by Global Insurance Companies buying up the bonds.

Incredibly the money was borrowed, to bail out many of the private corporations who created the recession but who are now profiting from the debt.

Even more incredibly the Insurance Companies are crying ‘Please don’t tie us in with the banks – We’re not the baddies’!

Well I’ve got news for you Insurance companies!
Thanks to the policies followed by all those chairmen of the Insurance Companies throughout the 1990′s of agglomeration, Cartels, price fixing and that word that they now pretend never existed ‘Banc-Assurance‘ …

You are the bad boys- You and the Banks are the same thing!

And where are all those Chairman of the Bank Assurers who created and introduced risk into the Economy now?
Yes, all sitting pretty in the House of Lord’s, unelected and having further say ion the Country’s future. Outrageous!

Back to the point, Insurance Companies must now adjust to the new economics.
In the past they have had the arrogance to talk about fixed seven year cycles between hard markets where they can increase the rates to high profit levels and soft markets where wider levels of competition keep the prices down. At the end of the day the volume of business is exactly the same and the levels of claims homogeneous, so why the fluctuations?

Purely for profit!

Now though these very same companies are stuck between a rock and a hard market as they no longer have either the control over the flow of money or thanks to Global business and The Internet, the number of entrants able to enter the market,

In the past when Insurance Companies were making losses or wanted to make super-profit, the Insurance market would Cartel like, hike it’s prices across the board. A so called hard market. They are no longer in a position to do this!
Furthermore the profits they make from their investment vehicles are down due the Interest rates sensibly being held low by the Bank of England.
It won’t be long before the Insurance Company shareholders start screaming when they don’t get the dividends they expect or deserve! The Insurance Companies are already moaning about how incredibly unfair the Base Rate is to their investment vehicles!

Remember these are the same people – The Banks – who would like to charge you 15% on your mortgage debt and make super profits – if they thought they could get away with it. They’re already charging you more than that on your Credit Cards!

The Car Insurance Market is traditionally the first to harden it’s rates, with you and me the motorist suffering, but with increased number of distribution channels and the ability to shop around, it would be a foolish insurer who hardened his rates and expected to keep his book of business in the current economy.

You can expect similar resistance to unfair and unwarranted commercial insurance premium hikes, especially when the business had carried out good risk management and claims loss prevention.
Why should they pay more?
Because they are in a poorly managed risk pool?
Shop around Shop owners!

If the collective Insurance industry try to impose a hard market on the public during a recession they will create untold social problems as individuals and businesses under insure and health and safety practices go out the window.

Insurance Companies have to develop a real sense of social responsibility not just some hyped up marketing blurb about planting tress or paying to brand yourselves with Athletics and Football!

Insurance Companies have got to learn to be symbiotic and not Parasites on the State and it’s People! Restricting their profits would be a good place to start!

Related posts:

1. Insurance Companies buy more UK Government Debt
2. UK Car Insurance Rates Must Harden As Loss Making Companies Claims Reserves Run Dry!
3. Insurance Companies Blame 2009 Losses on Personal Accident & Bodily Injury Claims