The Competition Commission has been conducting an in-depth review of the payment protection insurance sector after a referral from the Office of Fair Trading, and following on from the Financial Services Authority who began investigation in 2005. There have been many problems within the sector including high premiums being charged for the cover and just recently the Competition Commission announced that banks are raking in 80% of the premiums that they charge for payment protection in profits.



As a result of this the Competition Commission are exercising their legal rights by forcing the sector to reveal the profits made from the cover. With consumers paying out over ?4 billion for payment protection cover last year alone banks are reluctant to reveal how much of this is profit.

Payment protection is sold alongside borrowing such as loans and credit cards when consumers take out the borrowing. It has even been known to have been included in with the cost of the loan without the consumer being aware. Not only is the cover very expensive when taken out this way but very little information is given regarding the key facts and exclusions which exist in all payment protection insurance policies.

Some typical reasons which could stop a person from claiming on a policy include being retired, self-employed, suffering an illness which is pre-existing or if you only work in part time employment. While these are the most common there can be others set out by providers so reading the small print is essential.

Taking your payment protection alongside your loan or credit card with the high street lender means you will be paying up to five times more for the cover than if you have gone with an independent specialist provider. 50% to 80% commission rates looked at by the Commission were found to be typical on the selling of payment protection with the high street lender, and 40% to 65% when it came to selling mortgage protection. While some changes for the better have been seen since the Financial Services Authority handed out fines with the latest being a mortgage firm, much more needs to be done when it comes to the way the high street lender "rips-off" the consumer.

When taken with an independent specialist provider, payment protection insurance can give you an income once you have been out of work for a certain period of time due to an accident, sickness or unemployment. The waiting period can be anywhere between 31 and 90 days dependant on the provider and can last between 12 and 24 months. The income you get each month is tax free and can stop you from getting behind on your credit card or loan repayments.

An independent specialist will not only be able to save you money on your payment protection but also make sure that you have access to the key facts and exclusions in a policy which could mean you would be ineligible to make a claim. A lack of this information is what led to the investigation and the mis-selling scandal in the first instance. Hopefully changes will be made for the better in the future and payment insurance will become affordable to all individuals but for now buying the cover from a specialist is the best option.