New rules to cause PPI cover changes
After the huge scandal of misselling of Payment Protection Insurance (PPI), there have been several changes in the way in which cover can be sold. Whilst PPI could formerly be sold when loans were taken out, it can now only be sold seven days after a mortgage quote is provided or a customer takes out a credit agreement. Whilst being favourable for consumers, it has now been highlighted that financial advisors also have the opportunity to alter the cover offered and shape PPI into a new product.
One of the reasons that missold PPI has been so widely spread is because it could be sold alongside the approval of a credit agreement. This gave agents the chance falsely to claim that PPI was needed for a credit approval, giving more weight to their sales pitch. In a bid to correct this and provide consumers with more time to mull over whether to take out PPI or not, the Financial Services Authority (FSA) made changes to regulations, and from April 2012 a minimum of a week has to have passed from an initial quote to a PPI sale.
However, Defaqto has said that this actually offers advisors the chance to shape new PPI policies, providing people with cover for their loan payments but also a proportion of their income. Insight analyst for life and protection at Defaqto, Ben Heffer, said “Upgrading clients’ PPI coverage from just their mortgages or loan payments to include their income is an avenue worth exploring. Furthermore, upgrading cover to a permanent long-term income protection policy also establishes a firm foundation for the rest of their financial planning.”