According to the OFT report, PPI offers a poor rate of payout for claims – as low as 19 per cent – and many people who take out PPI on loans end up paying interest on both the loan and insurance.
PPI claims to offer protection on loans in case the borrower cannot afford to make repayments due to an unexpected change in circumstances. Yet two-thirds of unsecured loans are repaid early and PPI is thus unnecessary, Richard Mason from financial comparison website moneysupermarket.com told the Observer.
Officials started investigating the £5.4 billion PPI market in April amid claims that it offers poor returns on claims.
Heads of PPI firms are now due to meet with the OFT later this month to discuss the report and the final conclusions are expected for December.
With PPI offering a poor rate for claims and containing numerous exclusions, this latest report may prompt many to think twice before taking out a PPI policy on their loan or credit card.