In last week’s PPI history lesson we discussed the ban on Single Premium Policies and the real difference it will make to thousands of financial consumers. Today, we’re talking cold hard cash, £3.8bn of it to be exact.

That’s the amount that consumers paid in 2007 for Payment Protection Insurance cover, so it’s easy to see how PPI became a very important and lucrative product within the retail finance sector. Back in the days before we uncovered the scam, every financial institution you can think of was selling PPI. Banks, building societies, credit card companies, mortgage providers, even car finance outfits – they were all at it. And it’s no wonder when you consider that the Competition Commission estimated a profit of over £1.4bn for the top 12 distributors alone, in just one year. If that doesn’t make you want to check if you’ve got PPI claims worth something, who knows what will.

Here’s a bit of a Payment Protection Insurance (PPI) ‘recent history’ lesson:

Back in Jan, the Competition Commission (CC) finished it’s 2 year investigation into PPI and decided that single premium policies (the ones where it’s lumped on upfront) where infair and should be outlawed. By May ‘09 they were.

The CC also established that letting PPI providers sell cover alongside loans meant that they had little competition which in turn leads to higher than necessary prices and less choice. The result: a ban on a lender selling PPI to a customer within 7 days of agreeing a loan.

So, we have two positive outcomes as a result of the PPI investigation and now that hundreds of thousands of consumers have already registered a PPI claim it looks like karma is working it’s magic.

In the next brief history of PPI, I’ll fill you in on the profits and margins that made PPI a favourite with the banks and providers.

Hector Sants is head of the Financial Services Authority (FSA) and he spoke to a delegation at Bloomberg recently about how the FSA have put an end to unfair Payment Protection Insurance (PPI). Sants wrote to a number of providers requesting they stop selling the worst kind of PPI: single premium.

This is the one that’s added on at the start of a borrowing as a lump sum and results in you paying interest on the policy and the loan amount. No wonder then that so many PPI claims have been made for refunds of interest and policy payments.

The thing is, writing to insurance providers in 2009 and is nothing to be proud about, UK banking customers have been mis-sold PPI for many years. In fact Which? the consumer watchdog, raised issues about PPI back in the early 90’s. Hector should’ve got his typewriter out back at the beginning of the last recession.

The Financial Services Authority has made a statement of intent to keep an eye out for any Payment Protection Insurance (PPI) Companies that are looking to shake off liabilities with the help of the phoenix strategy.

Phoenixing is a tactic used by firms that can’t afford to pay back a loan or have been hit with a crippling bill. The Company shuts down and simply re-opens under a different but usually similar name. Speaking at the Mortgage Business Expo in London yesterday, Lesley Titcomb, director of small firms and contact centre said “the FSA was on the look out for this kind of activity… firms are having to reassess past PPI claims they have rejected and this could mean more firms try and become phoenix firms to leave these behind”.

Global financial services company Swiss Re did some research this year on payment protection insurance (PPI) and income protection insurance and their figures show new sales of both are on a sharp decent.

They attribute the decline in sales to three factors:

- The lousy economy
- Employers stopping income protection cover for their employees
- and the terrible image of the insurance after mis-sold PPI policies were revealed

This has resulted, Swiss Re says, in a massive gap between the cover adults currently have and the cover they should have. And when they say massive they mean £190 billion, so yep, that’s massive.

A survey by the Institute of Financial Planning (IFP) backs up what the financial services company have revealed and found that 75% of people admit they would struggle all or some of the time if their circumstances changed for the worse.

It seems every day another slow-head-shake fact comes out about Payment Protection Insurance (PPI) and the way it’s been sold. Today, the Financial Ombudsman (FOS) has accused loan insurance providers of using “vague” clauses to reject claims from policy-holders who have become unemployed in the downturn.

A Providers favourite when it comes to rejecting PPI claims is that the borrower was: “aware of any increase in the risk of unemployment” and didn’t make it known. This is the classic tripe that insurers use to avoid paying out, of course they say it’s to protect them from customers who bought cover knowing that they were about to become unemployed. If that’s the case, there’s about 57.5m Brits right now who are aware they may soon become unemployed, so PPI must be useless (but we already knew this).

Although Payment Protection Insurance (PPI) has been around for a while and is currently (not) enjoying the spotlight, it is still an unknown quantity to many banking consumers. This undoubtedly needs redressing as the very reason why the banks were able to get away with this for so long was the fact that people didn’t know enough about PPI and were paying for inappropriate cover.

Thankfully, the Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) are doing what they can to educate the British public and there’s no-end of PPI claim Companies popping up on the TV but if you’re still a little unsure as to what PPI is, check out this article at LoveMoney.com that discusses ppi charges, what they are and what to do about them.

Now – we believe in a fair trial, with both sides being heard and yesterday we reported on the fine that the Financial Services Authority (FSA) had slipped under Swinton Insurance’s wiper blade. It was for mis-selling PPI and totalled £770,000 plus Swinton will refund nearly half a million customers. Anyway, they’ve released a statement today and it’s only right that we give them a voice…

“Swinton takes the matter very seriously and will be contacting all customers concerned. The company apologises to any customer affected, and has set up a dedicated unit to deal with the PPI cases.”

It does go on and you can find the rest of it a their website but we though it somewhat reassuring to see an institution coming out and making an honest statement instead of the usual BS.

Here’s a spot of Payment Protection Insurance (PPI) Trivia for you – what do all these Companies have in common:

- Alliance & Leicester
- Egg
- Land of Leather
- Liverpool Victoria
- Swinton

Answer: They’ve all been fined for mis-selling PPI.

The latest of this group to get what they deserve, is Swinton the insurance Company. They’ve been fined £770,000 for inappropriate selling of PPI and ordered to refund 480,000 customers.

The Financial Services Authority (FSA) came to an agreement with the Insurer on what action they must take late last week, so if you’re a Swinton customer, you can probably expect some PPI compensation or a refund, but first – a letter or phone call to keep you clued up.