Loan protection - A trap for consumers

The wrong insurance on bank and building society loans is being pushed onto consumers by banking staff, according to a research programme.

The case of loan protection insurance is being reopened again after accusations of disturbing sales methods being used by banks.

The payment protection insurance (PPI) is sold alongside loans and mortgages and provides security if people lose their jobs or are unable to work.

However, financial industry experts are accusing the industry of offering consumers a safety net with large holes.

Radio 4's Inside Story next Saturday shows the way in which customers are pushed into policies by bank and building society staff.

In the Radio 4 programme, a researcher visited eight different banks and building societies asking for a £3,000 loan.

Almost all lenders automatically included insurance with the loan, and most refused to give written information on the policy.

Simon Burgess of insurance broker Burgesses told thisismoney financial institutions pay out less than ten per cent of all premiums under £500 million in claims.

It is thought PPI brings in at least one billion pounds a year in profits.