Christine Seib sounds a warning over payment protection insurance
We all know how much you Brits love a chance to laugh at the French.
So I wasn't surprised at the prominent position given to my story in The Times last week about French-owned Cardif Pinnacle's decision to pull out of the stand-alone income protection insurance market.
It seems that Brits are laid off a whole lot more than the insurer, owned by BNP Paribas, bargained for. Given that Britain-France comparisons are all the rage - a trend began by President Chirac with his disparaging views on the British diet - my news editor was glad of the chance to look at redundancy in the two countries and have a bit of gentle fun, picture-wise, at the expense of your Gallic neighbours.
Pinnacle has written to 2,600 policyholders to tell them that after July 20 they will no longer be insured against redundancy, since the insurer has run up significant losses on the cover. A spokesman said income protection insurance is usually sold as a mortgage add-on, with underwriters benefiting from all the credit checking that goes into home loans.
For Pinnacle, selling the cover without such in-depth knowledge of the policyholder has proved a disaster as people working in industries with a high risk of redundancy, such as IT, finance and telecoms, snapped up what rival insurers described as cut-price cover.
This story got me thinking about the various protection covers available. Riffling through our back issues, I found few complaints about able income protection. But according to almost every expert I could find, payment protection, commonly sold by banks to cover customers against the risk of not being able to pay off their mortgages, credit cards and personal loans, is rarely a good buy.
Research by LifeSearch shows that 25 million British borrowers waste about £6bn a year on it, with 80% of the premiums going to the banks in commission and few claims made.
Borrowers also underestimate how much the insurance costs them, according to Morgan Stanley. The FSA is so worried about payment protection consumers being ripped off it is investigating the sector.
This brought to mind a personal experience. About a year ago I found that despite having neither requested it, or been asked by my bank whether I wanted it, I had been forking out for monthly payment protection insurance on my measly credit card debt for over five years - a minimum of £6 a time. Despite my unstoppable shoe habit, there was never a chance that I would not be able to afford to pay off my card, which means I have wasted at least £360 on cover I didn't want or need.
The moral of the story? Always check bank statements, no matter how painful it may be. And don't think you can't be outsmarted because you're in the financial profession. Hell, I've spent the past year or so advising readers to check small print yet I've been done up like one of those kippers Chirac so hates.
And you know what really hurts? How many shoes that £360 could have bought. IT