PPI Claims

Payment protection insurance, which is more commonly known as PPI and also goes by the name of credit insurance and credit protection insurance, has become a large topic of focus in the British banking world.

In the 1990s, payment protection insurance came about. The aim of this insurance was to protect consumers who took out loans, mortgages and credit cards. With this insurance, should borrowers become unable to pay their debts do to unforeseen circumstances, such as the loss of a job or the inability to work because of illness or injury, payments would still be made on those debts that were covered by PPI.

While the idea behind payment protection insurance seems like one that has borrowers’ interests at heart, several banks that issued this insurance only had their own best interest in mind. Thus, the huge scandal that surrounded PPI unfolded.

How it Works

The intended purpose of payment protection insurance is to protect those who borrow money from banks in the form of car loans, personal loans, mortgages and credit cards. The customer pays into the insurance and, in the event that the customer falls into financial troubles, the insurance would step into to cover the repayment of those debts. The customer pays the policy, but upon filing a claim, the company that provides the payment protection insurance takes over payments on the loan that they insurance is covering.

Typically, this insurance covers:

  • Minimum payments on debts
  • Offers coverage of payments on debts for a predetermined period of time – often a period of 12 months

Once the predetermined period of time expires, should the borrower still require financial assistance for making the payments on their debts, the borrower will no longer be covered by the insurance and must make other financial arrangements.


While payment protection insurance may seem like an excellent way to protect a borrower, there are actually some pretty stiff stipulations associated with this insurance in order to guarantee eligibility. In order to be eligible for PPI, a consumer must:

  • Be between the ages of 18 and 64
  • Must be employed full time at the time of applying for PPI
  • Must not have a pre-existing medical condition
  • Must not be self-employeed
  • Must be employed by a reputable company that has not given any indication that a future job loss or cut in pay is a possibility
  • Must be in good financial standing and must not have defaulted on any previous loan payments

Since these guidelines for receiving coverage through PPI are so stringent, this type of insurance is not suitable for all people.

About the Mis-Selling of PPI

While the there are many stipulations that indicate the eligibility for coverage of PPI, it actually turned out that many people were never able to receive the benefits that this insurance offered. As a result, it turned out that banks were making record profits, thanks to the sale of this insurance. Because such huge profits were reported, banks wanted to continue to cash in and in order to do so, they began mis-selling this insurance.

What is mis-sold payment protection insurance? When a customer is not made fully aware of the terms and conditions of this insurance, yet purchased it anyway, they were mis-sold PPI. In addition, many consumers who were taking out loans, mortgages or credit cards also purchased payment protection insurance without being informed.

How the Scandal Unfolded

Many consumers became aware that they were mis-sold payment protection insurance when they went to file a claim. Upon filing a claim, consumers who were not informed of the details regarding eligibility of this insurance found that they were not covered and the insurance that they purchased did not protect them. Those who were sold the insurance without being told also began to discover that they were making payments on an insurance that they never even knew they purchased.

Mis-Sold PPI Claims

In the insurance industry, making a claim typically means reporting that an incident occurred that warrants the coverage of insurance. For example, in the case of car insurance, if a person gets into an accident, filing a PPI claim of the accident means that the car insurance will provide coverage for damages and medical bills that are associated with that accident. In the case of payment protection insurance, when a person becomes unemployed or ill and unable to make his or her payments on the debts associate with the loan that the insurance covers, the agency that provided the PPI coverage should come into play and make payments.

Since the mis-selling scandal of payment protection insurance actually did not provide the coverage that those who were affected thought it would, these people began filing mis-sold PPI claims. Instead of filing claims to receive the benefits offered by their payment protection insurance, people began filing ppi reclaim requests against the banks that mis-sold the insurance. Since so many people were mis-sold PPI, the banks that were at the root of the scandal have had to pay back literally billions. In fact, the scandal became so large and so many mis-sold PPI claims were being made, the banks that were associated with the scandal have put aside an estimated total of £14 billion pounds in order to cover the reimbursement of the mis-sold claims.

The Future

The scandal of mis-sold payment protection insurance has actually been in the news for some time. It first began making headlines in 2005. However, while it has been 8 years since the scandal gained public recognition, it was so great that it is going to take a very long time to for all mis-sold PPI claims to be filed. It is also going to take a long time for all mis-sold PPI claims to be reimbursed.

Payment protection insurance is still offered as a way to protect consumers who take out mortgages, loans and credit cards; however, given the nature of the scandal, the procedures for applying for and receiving such insurance have become much stricter and are now monitored very closely.