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Big profits from protection on the high street

Banks and lenders are making huge profits from payment protection insurance and mortgage payment protection des-pite the plans being flagged up as areas of concern by the FSA.

In a report from Morgan Stanley Equity Research seen by Money Marketing, Lloyds TSB says around 17 per cent of its profits come from PPI. Alliance & Leicester follows with 12 per cent, HBOS 11 per cent, Barclays 7 per cent and Northern Rock and Royal Bank of Scotland 4 per cent each.

The report warns that customers who buy PPI do not understand the pricing and the expense of the product they are buying.

Protection specialist Lifesearch estimates there are over 25 million PPI policies in force, of which around three million are MPPI policies.

Senior technical adviser Kevin Carr says: “The sums assured on mortgages are, of course, often far greater than personal loans and cre- dit cards so the premiums are far higher and hence so are the profits. There is a market for mortgage payment protection insurance but, in my view, only where a customer cannot obtain income protection due either to occupation, health or budget.”

FSA spokesman Robin Gordon-Walker says: “MPPI is high on the FSA’s agenda and they are very much in our sights. It is a major priority for us under our general insurance jurisdiction.”

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