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The financial watchdog has forced through new rules aimed at stopping the selling of payment protection insurance (PPI) to those who cannot claim on it.
The FSA has revised its rules so that any firm selling PPI will have to establish whether the customer can actually claim on it before the insurance is sold.
It has been one of the many criticisms of PPI that it is often sold to people who will never be eligible to benefit from it. Anyone on a fixed-term employment contract, over the age limit for the insurance or with pre-existing medical problems will not be able to claim.
Under the existing FSA rules these limitations are spelled out in the terms and conditions of PPI contracts and the FSA has already ruled that sellers should make these clear to customers when they buy.
However, ongoing FSA investigations into the PPI market, as well as other consumer-led research, has shown that sellers are not sticking to the rules.
The changes now being enacted mean firms have to show that their staff establish that customers can claim on PPI before selling the policy. Additionally, the ‘cooling off’ period when customers can cancel the insurance after they buy has been extended from 14 days to 30 days, although most financial firms already gave customers 30 days.
Dan Waters, FSA director of retail policy, said: ‘This is another important achievement in more principles-based regulation. We have greatly simplified our rules in areas of general insurance markets where outcomes for consumers are generally good. In a few areas however, like payment protection insurance, we have responded to continuing market failures and consumer detriment by introducing carefully targeted rules to help ensure that consumers achieve a fair deal.’
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