If the consumer watchdog Which? can get mixed up with the level of refund available from a cancelled single-premium protection policy, what chance does the man in the street have?
Reading through an article in May’s edition of Which? magazine, I stumbled across a sentence that made me draw breath.
In an article discussing what to look out for in the PPI market, it stated: “But if you have bought PPI, under new FSA guidelines, you can now cancel single-premium PPI and get a proportionate part of the refund.”
The article seems to be claiming that consumers will get a pro rata refund but this is not the case. Indeed, it was this very point that generated a great deal of frustration in the market when the FSA initially announced that the deal it had struck with the single-premium PPI industry earlier this year.
The agreement reached means providers have to: “Calculate the refund fairly, taking into account their reasonably incurred costs, which may or may not result in a pro rata refund.”
But what constitutes a “reasonably incurred cost” and surely this simply leaves the door wide open for unscrupulous providers to drastically cut the scale of the refunds they pay on cancelled policies?
Which? has played a massive part in raising awareness about the problems in the PPI market and continues to offer excellent information and advice for consumers struggling to get a good deal.
However, the fact that it can make a mistake with regard to single-premium policy refunds shows how effectively providers have muddied the waters and confused the issues involved for everybody.
The ongoing battle over bank charges gives a very clear indication of how big financial providers operate and the view they are likely to take when it comes to working out the reasonably incurred costs in cancelling a policy.
The FSA undoubtedly missed an opportunity to build consumer trust and improve transparency in the single-premium PPI market and should have insisted on pro rata refunds for cancelled policies.
Instead, we have a situation where people think that they are getting proportionate refunds but in truth it is unlikely that they will get anything of the sort by the time that providers have added up their own costs in settling the matter.
What is most depressing is that the clients most likely to be offered single-premium policies are often the least financially sophisticated and, in many of the sales being made, providers and intermediaries have abused their position of power.
Now those looking to cancel cannot even be assured of a fair deal when they do so.
British Insurance Limited