An easy way to reclaim rip-off premiums

If you're unhappy with an insurance policy sold alongside a loan, credit card or mortgage, then this online tool will file your complaint in five minutes!

Here at lovemoney.com, we're not big fans of a type of cover known as payment protection insurance (PPI). Indeed, our sister site, Fool.co.uk, has been campaigning against PPI for more than six years.

Payment protection insurance is an optional insurance policy, most often sold alongside credit cards, personal loans and mortgages. It meets your monthly repayments if you are unable to work due to an accident, sickness or unemployment, usually for up to a year. PPI covering credit cards and personal loans also includes life cover to pay off your debt if you die.

Cleaning up a crooked market

For decades, the PPI market has been dominated by lenders, which charge sky-high prices for this insurance. Hence, we've argued that the PPI industry is anti-competitive and -- after a two-year investigation -- the Competition Commission finally agreed. As I explained in Is unemployment insurance up to scratch?, the Commission has outlawed the sale of PPI by lenders at the point of sale and for seven days thereafter.

This point-of-sale ban is terrific news for borrowers, as it helps to clean up a market worth more £5 billion a year. However, I estimate that there are roughly 25 million PPI policies still in force, many of which have been sold using underhand or high-pressure selling practices. What can these customers do to seek redress?

Reclaim your rip-off premiums

The good news is that charity and consumer champion Which? (formerly the Consumers' Association) has launched an online tool which makes it simple to complain about mis-sold payment protection insurance. All you need do is visit www.which.co.uk/ppiclaim and complete the online form.

To complete said form, you'll need details of your PPI policy and why you believe that it wasn't sold to you in a fair and proper manner. Then select your lender from the drop-down menu, complete your personal and policy details, and select which mis-selling problems you encountered. (There are ten tick-boxes to choose from, so you may have to tick multiple boxes!)

This process takes about five minutes and, once complete, a formal mis-selling complaint is emailed directly to your lender. Alternatively, you can print off a letter to be posted to your PPI provider.

Another blow for the banks

As Which? warns, PPI is hugely overpriced: adding it to a five-year loan for £7,500 could cost up to £3,000 extra. This sum is normally charged as a single premium which is added to the loan, with interest charged on it. Thus, a successful mis-selling complaint could lead to a payout of thousands of pounds.

Another problem is that PPI doesn't provide long-term protection, as hardly any policies last for more than five years. Also, it is rare to find a policy which pays out benefits for more than twelve months in a row, so this is strictly short-term protection.

I'm delighted with this move by Which?, as its quick and easy online complaint tool strikes a major blow against greedy banks, building societies and other lenders. These firms grew fat on the extreme profits made by hard-selling PPI, so it's high time that they were put on an enforced diet!

In time, PPI mis-selling complaints could become as big as the mortgage-endowment scandal which rocked the banks in the past decade. Personally, I think that this is no bad thing, as it will discourage lenders from swindling their customers in future. Finally, Which? is also campaigning for wide-ranging banking reform; you can join in at www.weownthebanks.co.uk.

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