The Financial Ombudsman Service says it upholds 90% of PPI claims in the consumers’ favour, but many people with PPI haven’t complained.

According to the independent complaints service, the Financial Ombudsman Service, it finds in favour of consumers in 90% of complaints about payment protection insurance (PPI). That’s pretty shocking. It means that banks and insurance companies are routinely turning down complaints about PPI when they shouldn’t be. Although hundreds of thousands of people have complained about their payment protection insurance, it may not be too late if you think you have a claim.

The problem with payment protection insurance
Payment protection insurance is designed to cover the premiums on your loan or the payments on your credit card if you can't work because you're ill or you've lost your job. PPI and – in particular – the way it was sold in the past has come in for a lot of criticism from consumer groups. I’ve never been a fan of PPI for two reasons:

• Policy exclusions: Many of the policies that were sold by banks and insurers (often at the same time as you took out a loan or credit card) have lots of exclusions which mean many people wouldn’t be able to make a claim anyway, but this was often not explained.

• Cost. Although it’s possible to get a payment protection insurance policy that’s reasonable value for money – assuming that you would actually be able to claim on it – banks and insurers often pushed overpriced policies onto consumers without giving them the option to shop around.

Have you been mis-sold?
Not everyone who has a payment protection insurance policy has been mis-sold (i.e. sold something that wasn’t suitable for them), but if you fall into one of the following categories, you may have a case for getting your premiums back.

• You were self-employed. The vast majority of PPI policies won’t pay out if you’re self employed or on a fixed-term contract and you lose your job/work.

• You had medical problems you weren’t asked about. PPI policies rarely pay out for ‘pre-existing medical conditions’ – illnesses you’d suffered from before you took out the policy.

• You weren't told about exclusions. In many cases, policyholders weren’t told that stress, pregnancy or back problems weren’t covered.

• You were retired or over 65 or 70 at the time. If you were retired you wouldn’t be able to claim on the policy in the first place and if you were aged over 65 or 70 (even if you were still in work) you might not have been covered as most policies have an upper age limit.

• You were told that PPI was compulsory. A number of banks and lenders told consumers that they had to take out the payment protection insurance in order to get the loan.

SAVVY TIP: In some cases banks and lenders included PPI policies as part of the loan package without telling customers upfront, which is a clear-cut case of mis-selling. Others automatically charged the policy as a single upfront premium, which the borrower then paid interest on (often at a high rate of interest). This is also a situation where you should make a claim.

How to complain
If you want to complain about a PPI policy, your first step is to contact the company that sold you the policy.

• If you were sold your policy before 2005. The way payment protection insurance was sold wasn’t regulated by the Financial Services Authority until January 2005, so – under the current rules – you can’t complain about a policy that you bought before January 2005.

SAVVY TIP: The FSA is currently consulting on whether it can make insurers reopen old cases and go back further than January 2005. It’s due to report on this at the end of the summer.

• If you were sold your policy after 2005. You have a right to complain about your policy if you believe you were mis-sold. If your complaint is rejected by the bank or insurer you have to act quickly as you only have six months from that date to take your complaint to the Financial Ombudsman Service.

SAVVY TIP: The FSA announced extra time so that policyholders who received a ‘final letter’ (i.e. the one that says the bank/insurer can’t or won’t do any more and the next stage is to complain to the Financial Ombudsman Service) between 28th November 2009 and 28th April 2010 would be given extra time to complain to the Ombudsman Service. This six month rule has been suspended until 27th October 2010.

Don’t give up
Banks and insurers should be getting the message that they have to treat customers who complain fairly. But the fact that the Financial Ombudsman Service finds in favour of 90% of customers whose complaint has already been rejected by the bank or insurance company (or at the very least, not settled to the borrower’s satisfaction) shows this isn’t happening.

• Many people don't complain once their complaint has been rejected by their bank or insurer Figures from the FSA last year showed that, of those who have their complaint about PPI rejected by their bank or building society, only 16% take their complaint to the Financial Ombudsman Service. But the vast majority had their complaint upheld by the FOS. The Financial Ombudsman Service has a payment protection insurance factsheet and information on what you'd need to provide if you made a complaint about PPI (halfway down the page).

SAVVY HELP: Penny O’Nions, who’s a former doctor and independent financial adviser, is one of SavvyWoman’s panel of experts. Why not ask Penny a question about payment protection insurance by clicking here?