Reviewed for 2018
Payment protection insurance (PPI) has overtaken overdraft charges as the primary consumer battleground.
The cover, which is supposed to protect borrowers against defaulting on their loans in the event that they become ill or lose their job, has been found to have been mis-sold on a vast scale. The number of consumers who have been paying for useless cover potentially runs into the millions.
There has been a huge surge of consumers reclaiming misspent PPI premiums - and many self-employed people could be in line for a refund as a result.
Back in 2011, the banks announced that they do not intend to appeal against the latest court decision against them, and have therefore abandoned their fight against claims of PPI mis-selling. The long-running legal dispute is now over, and the banks have begun preparations for dealing with repayments.
The main High Street banks have set aside around £5 billion to cover the cost of repayments, and they intend to hire some 6,000 staff to deal with the backlog of claims that had been put on hold pending a legal resolution – and with the slew of new complaints that are likely to materialise in the coming weeks.
However, there is now a deadline in place for claiming back PPI. The regulator has said that consumers have until 29 August 2019 to make their claim, and it is thought that there will be an upswing in claims leadin up to that point. Any claims made after that date will not be considered - so it's important to get your paperwork in quickly.
The self-employed were amongst the biggest victims of PPI mis-selling. The insurance was often (and continues to be) advertised as a way of protecting the policyholder against the risk of losing their job. Many self-employed people were also sold the insurance, despite the fact that the terms of the policy frequently meant that they would not actually be covered.
If you were self-employed when you bought PPI, you should check the wording of your policy carefully. If it includes a clause that says you will be covered in the event of unemployment, you are likely to have grounds for reclaiming your premiums.
Additionally, you may be able to claim if you were simply not asked about your employment status, or if the cover was added without your knowledge. Both of these practices were apparently common.
There are several other circumstances in which you may be able to claim, but which are not directly linked to self-employment:
• Medical conditions. When you took out the policy, you had a
pre-existing medical condition which you either were not asked about or
which was ignored.
• Misinformation. You were told, or it was inferred, that PPI was compulsory, or that your application for credit would not be approved unless you took it.
• Time periods. The period of the PPI policy was not as long as the total term of your loan.
It is important to understand that this is not an exhaustive list of circumstances in which you might be able to reclaim your premiums. You may wish to seek legal advice if you think you were mis-sold PPI.
In addition to the above, a new ruling means that even more people may be able to claim back PPI.
The 2014 case of Susan Plevin found that the claimant was treated unfairly because she wasn't told how much commission was taken by the bank on her PPI premiums - in her case, 71.8 per cent. The ruling set a precedent that compensation is payable if more than 50 per cent of the premium went straight to the lender - and the average amount is 67 per cent.
The Plevin ruling has opened up many more claims against unfairly or missold PPI, to the point where Money Saving Expert now say that simply having had PPI could be enough for a claim.
Reclaiming PPI premiums is a relatively simple process. You should write a letter to your bank explaining the grounds for your claim, giving as much detail as possible. Refer to the policy wording where you can. The bank will have eight weeks to respond.
You may also consider asking for compensation over and above the premiums that you have paid, for having ‘been deprived’ of the money that you would otherwise not have spent.
If your lender rejects your claim, you should consider contacting the Financial Ombudsman. The Ombudsman has a strong history of upholding consumer complaints regarding PPI – although there is now a sense that banks will be less likely to reject claims that they think they will lose at the Ombudsman stage.
Finally, you should remember that your PPI cover may well be cancelled when you begin your complaint. You should therefore consider suitable alternatives before proceeding.
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