2m Loans Insurance Policies 'Have Been Mis-sold'

Around two million consumers have been sold costly loans insurance that they cannot use, consumer group Which? has claimed.

According to the group, the miss-selling of Payment Protection Insurance (PPI) might run to around one third of the total number of people who took the cover over the past five years: a much higher proportion than previously thought.

The figures were released ahead of the publication of a report on PPI from the government's Competition Commission, which is anticipated to strongly criticise some of the sales techniques employed by the loans insurance providers.

PPI is generally sold in conjunction with loans in order to cover the cost of repayments if the borrower faces a sudden change in life circumstances, such as becoming redundant or going bankrupt. However, some consumers have complained that they are left unable to claim PPI due to falling foul of exclusions which might have been easily detected by the provider when the insurance was initially sold.

This means that the customers have been paying for the cover not only without any hope of ever claiming it, but with their provider taking these payments in the knowledge that they can never claim it.

Some of these easy-to-detect exclusions were explained by a Which? spokesman. "People who are self-employed or on a fixed-term job contract, for example, often aren't covered by PPI," he said. "Nor are many people aged 65 and over, or people who might claim for absences relating to pre-existing medical conditions."

The PPI industry is worth around £5 billion a year to insurers in the UK.