A little while ago we mentioned that whilst payment protection insurance in general had acquired a bit a tainted reputation, things had been done to rein in the worst bits and make sure that what gets sold is needed and is at least reasonable value.
Before the recession the mortgage payment protection market hadn't had the same problems, so it was a little surprising that Lord Turner, the chairman of the Financial Services Authority, laid into the UK's insurers on this when he recently addressed their trade body at its annual conference.
He had two main concerns; firstly that the cost of cover was going up. He might well have clocked that Legal and General had upped their rates by a fair bit at the beginning of the month. Although we might not like a price rise, it's hard to see what Legal and General did wrong, as they were responding to general economic conditions and managing their exposure. Arguably if they hadn't done that they would have been criticised by FSA later for not reacting to events.
To give Lord Turner the benefit of the doubt he probably wasn't getting at price rises as such, but was raising the possibility that insurers with existing contracts might try to reduce the level of cover they were providing for customers.
We're not sure just how much research FSA had actually done on this, but as far as we can see from having looked at a couple of policies there isn't any scope for the insurer to start cutting the cover they provide. We would be a bit surprised if insurers actually now did this as not only would it be illegal, if it breaches their contract with you, but they know that FSA are watching carefully and will pull them up on a variety of things including the requirement that they treat their customers fairly.
If you already have this insurance and have to make a claim read your policy wording cover to cover before you submit a claim. Then you'll be much better prepared if the insurer tries to decline paying your claim, or doesn't offer the level of cover that you are entitled to. Make sure that you complain if necessary, and make it clear that you're well aware of Lord Turner's speech (- the bit you need is at the top of page 2).
If you're about to become a first time buyer make sure that you read the policy conditions for a number of policies before you buy. For this particular type of insurance don't assume that buying the cheapest policy will be best. There can be quite a big difference in the cover that different insurers provide; you won't be saving money if, for example, the insurer doesn't provide cover if you opt for voluntary redundancy and that's one of their exclusions!
