Mis-sold insurance estimated cost up
The City watchdog doubled its original estimate for the cost to insurers of compensating people who are mis-sold controversial payment protection insurance (PPI).The Financial Services Authority said it was now expecting firms to have to handle around 450,000 complaints about the cover each year going forward, rather than the 158,000 it had originally estimated.
The inflated number of projected complaints is expected to push up the cost of settling future mis-selling claims from up to £80 million, to as much as £203 million a year.
On top of this, banks and insurers are also expected to have to pay out between £900 million and £2.7 billion to compensate people who have previously been mis-sold one of the policies.
But despite conceding that the costs were likely to be higher than it had originally envisaged, the FSA insisted it was not watering down its proposals.
In September last year, the regulator said firms representing more than 40% of sales in the single premium PPI market had agreed to review sales stretching back to July 2007.
It also said it was issuing new guidance to ensure PPI complaints were handled properly in future, adding that 185,000 previously rejected claims would have to be reassessed against this benchmark.
The measures aim to ensure that consumers are treated consistently and fairly, either when they buy a new PPI policy or complain about an existing one.
Publishing feedback on responses it had received in relation to the proposals today, the FSA said consumer groups were very supportive, but PPI providers and industry groups had been "highly critical".
The industry complained that the FSA had not shown there was a genuine problem around the sale of PPI, which covers debt repayments if the holder is ill or loses their job, or the way complaints about the product were handled. It added that the proposed solution was not "appropriate or proportionate", and it took issue with the regulator's estimates of the costs involved.
In September last year, the regulator said firms representing more than 40% of sales in the single premium PPI market had agreed to review sales stretching back to July 2007.
It also said it was issuing new guidance to ensure PPI complaints were handled properly in future, adding that 185,000 previously rejected claims would have to be reassessed against this benchmark.
The measures aim to ensure that consumers are treated consistently and fairly, either when they buy a new PPI policy or complain about an existing one.
Publishing feedback on responses it had received in relation to the proposals today, the FSA said consumer groups were very supportive, but PPI providers and industry groups had been "highly critical".
The industry complained that the FSA had not shown there was a genuine problem around the sale of PPI, which covers debt repayments if the holder is ill or loses their job, or the way complaints about the product were handled. It added that the proposed solution was not "appropriate or proportionate", and it took issue with the regulator's estimates of the costs involved.
© 2012 Press Association