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Change in insurance policies for unsecured loans

Change in insurance policies for unsecured loans

Category: Loans

Updated: 04/12/2009
First Published: 21/01/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Several high street lenders have announced that they will no longer be offering single premium payment protection insurance (PPI) alongside unsecured loans.

Barclays, Alliance & Leicester, Lloyds TSB, Co-operative Bank, NatWest and the Royal Bank of Scotland will withdraw these options at the end of the month.

PPI is often offered to protect consumers who may become unable to repay unsecured loans, but single premium policies have been criticised because they add the cost on to the product.

Announcing the moves, the Financial Services Authority urged other lenders to follow the example and switch to regular premium PPI.

Spokesman Jon Pain remarked: "A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately."

Peter Tutton, debt policy officer at Citizens Advice, also welcomed the decisions, warning that single premium policies can "add substantially" to the cost of repaying unsecured loans.

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