Have you been ripped off by debt insurance?

It seems that one of the biggest rip offs in the financial services industry is finally about to be resolved. Four firms, including one high-street name, are set to be fined by the City watchdog within days for mis-selling debt insurance.

This cover is routinely added to our mortgages, credit cards and loans to protect our repayments if we are unable to work because of an accident, sickness or unemployment – or that’s what the insurers say.

Many of us don’t even know we’ve got the cover and wouldn’t ever claim even if we did.

The big banks behind this type of insurance pay out only 20% of premiums in claims, according to the Office of Fair Trading, which is staggeringly low when compared with 80% for car insurers and 54% for home cover.

The reason is that the cover is riddled with exclusions for self-employed people, contract workers and people with common problems such as back pain and stress. Even if you are not caught out by these exclusions, the chances are you will find a job before you get a payout anyway.

I know this from first-hand experience. I once gave my sister-in-law some apparently disastrous advice which turned out to be spot on. Her and my brother had signed up for their first mortgage, and even before the ink was dry, the broker was pushing insurance to protect her repayments.

I said she shouldn’t bother; several months later, she lost her job and I was mortified.

Happily, she found another job well within the ‘excess’ period during which the insurer wouldn’t have paid out anyway.

The Financial Services Authority, the City watchdog, has already clamped down on the £5.5bn industry and we could see more action in the coming days.

It has already fined Loans.co.uk, an online provider, Regency Mortgage Corporation, and Redcats, a catalogue firm, a total of £781,000 for mis-selling and four more firms are expected to join the list next week.

If you have had problems claiming on a debt-insurance policy, or you have been a victim of the hard sell, let us know.

Comments

[S. T. Sivakumaran]

Double Whammy.

What are my options.

I recently settled after two years a secured loan of £75,000 with a leading lender. This loan was arranged through a broker. The settlement figure came at £90,000 because of the £15,000 insurance premium. I complained to the lender that charging an insurance premium of £15,000 for a loan of £75,000 was too much and asked them to refund this money they refused. They asked me to go to the broker which I have not yet done and will do so in a few days time.

During those years I paid a totla of c£18,000 as monthly repayments.

I obtained the original loan of £75,000 as debt consolidation buy it look more like increasing the debt rather than reducing it. For a loan of £75,000 I have to pay total of £108,000 (including insurance and monthly repayments).

The lender has refused to payout and expect the broker to do so (because contract was with the lender).

What are the remedies available for getting the overpayment (insurance) back? FSA, FINANCIAL OMBUDSMAN, MP, Courts.

If the above is not enough, the lender has seemed to have reported me to Credit reference agencies for missing payments during the settlement period. I have told them many times that I am in the process of settling the loan and to bear with me. But these pleadings seemed to have fallen deaf years. They give your a loan of £75k and ask £108k to settle and then make sure I do not get credit in the future at reasonable rates by reporting to the credit reference agencies. Double Whammy.

Please advice.

T.S

[Alan Lynch]

Checking the paperwork on an Abbeyloan my son's partner took out in Dec 04, I found she'd also been sold a hugely expensive CGNU PPI policy by Abbey (£25.01 a month to cover a £194.67 repayment). The small print in the policy requires that she must have been in the service of the same employer for 2 years before she can put in any sort of unemployment claim, which is astounding when only moments before the PPI was sold to her, she had declared on the loan paperwork that she had been been with her then employer for only 8 months.
Interestingly, this PPI sale appears to be in breach of one of the terms of the Loan Agreement: "PPI may be offered to those who wish to pay for it and who are eligible for it"
Have written to Abbey cancelling policy and am awaiting their reply on the above.

[Michael J Ledger]

Reference: British Gas.

Dear Sirs,

A small thing but without notice our direct debit for gas (only) was increased from £44-00 to £73-00 per month. A 60% increase. Even by current levels in the price of energy this was unforgivable. When questioned - 'oh we made a mistake' was the bland reply. No refund offered. They will pay when we switch after being customers for 40+ years.

Regards

Michael J Ledger

Rega

[Clare Truesdale]

I had a Debenhams store card which I had not used for some time. There had been no spending on it for some time and I had believed the balance to be zero. An amount of around £70 appeared on it a few months ago for a card protection policy.
I remember being offered this insurance by an assistant in the Belfast branch of Debenhams and declining.
I am a housewife who does not work so such cover would be useless.
I queried the amount and asked for some proof that I had purchased the policy. I also asked that the account be frozen until the matter could be looked into.
My request was ignored. The bills kept coming with interest and late payment charges added.
I again wrote but a default notice was issued. The amount grew to £106 pound and I paid up, mindful of the effect on my credit record.
I feel I have been ripped off and will never set foot in a Debenhams branch again.

[Shirley Tang]

We took a round the world trip and took out health insurance with Insure and go, half way through the journey we had xrays in Australia, little known to me but I was carrying my second child at the time, I requested a ultrascan as I had problems with my first pregnancy and with the xray we was not sure of the effects on the unborn child. Insure and go then agreed a 'guaranteed' payment upon return if I paid up front. Upon return I claimed for my 'guarnteed' payment and was subsequently declined. Like a busy mum, moving house, two small children I did not pursue it. How many other let insurance companies get away with it??

[Roy Doré]

My son took out a loan with Alliance and Leicester including PPI.

Some time after he became ill and tried to make a claim which was refused.

He fell into arrears and tried to cancel the PPI to reduce his outgoings and the increasing debt, but he was told that he couldn't cancel the PPI unless he cleared the arrears.

He remains unemployed due to ill health and has had recent meetings with the CAB to help him with his financial affairs. The A&L are continually chasing him for the outstanding arrears through a debt collection agency.

Early attempts to resolve this situation were met with aggresive behaviour from A&L and fob offs to the insurance company underwriting the PPI who were even less helpful if that is possible.

Unfortunalety, as yet there isn't a good channel for consumers to pursue this as far as I am aware.

There must be many many people who have been used and abused by this particularly nasty form of mis-selling and I would urge them to add their comments to this site and use any other means they can to raise the profile of this problem.

[M. D. Yeomans]

In October 05 I took out a ppi with HSBC. I had a bad back at the time and I am self employed so I thought it sensible. I was told by the staff member that it would cost two months interest to cancel it. Realising it was going to cost £2500 over the term of the loan I cancelled the ppi after three months. The whole loan was cancelled and a new one taken out. The payments I had all ready made, £800 or so were to pay for the ppi therefore incurring a total loss. I wrote to the bank and got no reply untill I was persistent enough to eventually receive a reply. They offered me £30 compensation and told not to take it further. I will never trust their advice again as they had wrongly advised me on a share transfer between my accounts as well.

[Brian Merchant]

Nearly 2 years ago, my wife and I took out a large consolidation loan with Firstplus, which included what we thought was a joint insurance plan, the cost of which added nearly 20% to the overall total borrowed! The intention was that my wife was to cover the payments for this loan from her wages, a fact which was made known at the time.

Unfortunately at the end of 2005 my wife had a stroke and since then has been unable to work. We lodged a claim on the insurance, which was duly paid without question for almost 6 months, based on the submission of continued health bulletins from our GP.

However after this time, our GP noted in his bulletin that my wife was very unlikely to return to full employment. When this bulletin was submitted, it was immediately returned, refusing payment. The reason given was that under one of the very poorly worded and hidden "small print" clauses, my wife was in fact the "second" signatory on the policy and therefore not covered for sickness under the terms of the policy.

Outwardly the document implies it is a joint policy and therefore would cover both parties. We have latterly submitted the policy document to several bodies, in our efforts to try and resolve the situation and even they have had great trouble in understanding this part of the policy and having made some payments, so perhaps do the actual insurers!

When the application forms were completed, Firstplus had insisted that my name was the "first" signatory, although it was known that my wife was to make the payments. The full the implications of this action were not realised at the time, as we would have taken steps ensure that my wife was covered.

The consequences of this situation are that on top of everything else, we now face losing our home, as I am unable to fulfill the payments from my income. We have lodged a case with the FSA, which has taken nearly 6 months to be picked up and is now only just being reviewed. In the meantime, payment to Firstplus has had to be made from our savings, which are now almost depleted.

Is this second signatory clause common practice? Has anyone fallen foul of this? At the very least we maintain that the policy was mis-sold and was obviously not suited to cover our situation. Hopefully something can be resolved, otherwise bankruptcy in inevitable!

[carolyn Eley]

Like Paul Webster ("Insurer spurns car crash victim", Sunday Times, Money, Jan. 28th, 2007) I too have found it impossible to claim against a mortgage insurance policy which I took out with Axa. In the course of corresponding with the company they have prevaricated and done everything possible to avoid giving fair consideration to my complaint.

At the time of choosing the policy I asked the Axa salesman to provide cover for death and disability to cover a £340,000 business loan. The policy was called a "Multiplan" and offered cover for several contingencies, including accident and illness.

Nearly a year later I broke my neck and suffered brain damage. Several phone calls were made to Axa but they refused to send out a claims form because they said that injury and disability was not covered on the policy.

It was impossible to tell from the policy documents whether more than just death was covered. The plan was called a "multiplan" but it was difficult to see where the "multi" part applied. The rep I bought it from had simply disappeared - he had gone bankrupt and divorced and was untraceable and so I had no recourse to him.

Once I had recovered enough I complained in person to a financial adviser employed by Axa and asked her to look into the background of how I ended up with the wrong policy. She came back to me and told me that I could not make a claim.

Not satisfied with this I approached a friend who was an insurance expert - (he helped design the self-regulating Lautro rules in the l980's). He obtained all the original paperwork from Axa and managed to establish that there was a clear and strong case for misselling.

After two years of correspondence with Axa, who had assured us at the outset that, because of the time the complaint was taking, they would not call in a time bar, Axa refused our complaint in 2000 and called in a six-year time bar.

I complained to the Ombudsman who, unbelievably, misread the complaint and thought I was claiming against the policy, and not for misselling, and dismissed the complaint immediately without allowing the statutory time for appeal. He later rescinded this, following a complaint, but then, after 20 days, dismissed the case anyway.

Over the years I have gone back to the ombudsman several times, pointing out that the original complaint was misread and that I had complained within the statutory period. The response has always been that the ombudsman cannot reconsider the decision of another ombudsman.

It seems quite clear that a complaint to an employee of an insurance company in person, constitutes a formal complaint. I had complained well within the six-year time bar, following my accident, and the employee later reluctantly signed an affidavit to that effect.This affidavit quite clearly states in several places that we believed we had been missold a policy by an Axa financial advisor; the employer herself also considered that we had been victims of misselling by Axa and this opinion was included in her affidavit.(By the way, before I had sight of the affidavit Axa actually falsely represented the contents of it - claiming that it stated that I had not taken out disability insurance because I could not afford it!)When I eventually managed to see the affidavit there was no such statement contained in it.

I lost my business and for several years lived on disability benefits - and so there was no way I could afford to take Axa to court.

I recently received a small inheritance and have made enquiries of a number of law firms which handle litigation. So far they have all told me that, because Axa is one of their corporate clients, they would not be able to represent me due to conflict of interest. Since Axa is one of the largest insurance companies in the world I assume that, due to the above, it would be nigh on impossible to find a solicitor who would be prepared to represent a complainant against such a powerful and ubiquitous company?

I can be reached on 07780 552343, or carolyneley@dialstart.net, should anyone out there have any suggesions where I go from here.

Carolyn Eley.

[roger white]

Ripped off? You bet!
My wife had personal loan through Marks & Spencer and was pressured to take their loan protection insurance.

When she later told them she wanted to cancel the protection insurance her monthly loan repayments went up!

How do you remove an insurance policy that is not meant to be dependent on the loan and end up paying more for the loan?

M&S's response to her complaint has been feeble, buried in jargon and decidely non-transparent - oh, and that is after her first letter went unanswered because "it got lost in the system"

Stuart Rose may have revitalised the company but his financial services arm is doing nothing to help the company's reputation for customer service.

[Chris George]

My wife has recently had a claim refused by Barclays Insurance Services on a policy that she took out in July 2004.

She had previously been self-employed but when she obtained full time employment based in the UK with an Australian Visa and relocation agency she decided to take out a loan. She was advised by the bank to take out insurance against unemployment due to ill health or loss of employment.

Loan repayments are £289.29 per month and the insurance cost is £70.86 per month.

In July 2005 the company downsized due to poor performance and my wife's contract was not renewed. Shortly after this my wife's depression returned and she has not worked since. In April 2005 she reached the ripe old age of 60 and started drawing her pension, a princely sum of £25.61 per week.

She is not now working, and having now reached the age of 62, she is unlikely to do so again except on a self-employed basis. She has been informed by Barclays Insurance that she should now attend the local job centre and apply for employment. Is this a joke or a cop-out by the insurance company.

In November 2006, whilst in Barclays bank on another matter she was advised that she could claim under the terms of the insurance either due to her ill health or due to loss of her job. This she did and despite relevant letters from her GP and her previous employer this claim has been refused.

The situation however becomes worse. As it would appear that there is no chance of this insurance policy paying out whatever the circumstances either now or in the future my wife and I decided to cancel the policy. We are informed that this cannot be done without renegotiating the loan and this may not be possible due to the fact that my wife is now unemployed. Additionally, if the loan is renegotiated it would involve an increase in the interest rate on the balance of the loan from 7.9% to 16.9%. We are thus stuck with paying for a totally useless insurance policy that will not pay out at this present time nor in the future.

[Caroline Hetherton]

I have had a Debenhams card for about ten years that was recently paid off so cancelled the direct debit. Have now received letters from the credit card company GE Money advising of an outstanding balance which I, of course, have queried. They have advised that a card protection plan fee of £29 had been taken from my card by CPP. I have since found out that this policy has been in existence since MAY 1997 - and I have debited each year! As this account was just reducing and I never used it again - I never really checked my statements - my fault I know. CPP confirm that I never used them and never registered my cards with them. I have since requested proof that I asked for this plan and was advised that it was set up on the back of a phone call by a Sales Team cold calling. I do not recall this or receiving subsequent correspondence. I was also working for a high street bank at this time so wouldn't have needed this service anyway! I am appalled that companies can debit your account by calling you at home and not getting you to sign anything. Debenhams themselves have been really unhelpful as have CPP. Only GE Money have tried to assist and each person I have spoken to there has in turned complained about all the calls they get about this from angry customers.

[vonloo escudero]

me and my husband had our mortgage arranged by bluer water financial services 2 years ago, they also have arranged for our life insurance with legal and general 4 months before my 2 yr fix mortgage ends, i left legal and general and switched to onother insurer which we thought more cheaper and practical. now, i havve been receiving letter from my previous broker harassing me to pay them and the legal and general with monies otherwise they will forward my case to the solicitors, i read the aggreement with legal and general, it says that i can cancel my insurance at anytime. I wondered why my previous broker is threatening and harassing us. I would appreciate if you caould give us advice where we stand legal wise. we are not financially well off that is why we swapped to a cheaper insurance provider, we have no money to spend for courts as we hardly meet our daily needs.

[Debt Payoff Calculator]

I am just starting to get into the Dave Ramsey material now - I have studied the Crown Financial program in the past and really like that one.