Treasury select committee member Andy Love says the payment protection insurance misselling scandal has exacerbated the protection gap and says this must be addressed by Government.
In a Westminster Hall debate this morning, Labour and Co-operative MP Love said providers have left the market in the wake of the scandal, reducing supply and pushing up prices.
He called on the Government to develop a plan of action to close the protection gap. He cited research from Cuna Mutual which shows 95 per cent of mortgages are sold without protection and just 1 per cent of new loans are covered.
He said: “The PPI misselling scandal has led to a collapse in trust and confidence in protection products and as a result there has been a withdrawal of these policies by all but the very small bespoke specialist providers.
“Financial insecurity is on the rise and at the same time there is a total absence from the market of protection products. The result has been the creation of what we call a protection gap.”
Treasury economic secretary Andrea Leadsom said the Government was already acting to deal with gap, including working to develop a range of simplified financial products and providing free access to debt advice.
Leadsom also agreed to “try and further” Love’s recommendation to look more closely at debt waivers which can be sold alongside loans. These products place the onus on the lender to indemnify against losses in the event a consumer cannot pay back their loan.