Friday, August 19, 2011

Payment Protection Insurance (PPI) - How the banks got smart when it comes to selling this awful product

I am just in the process of applying for a personal loan to finish off a house extension. Real pain but in order to spec up and make sure the interior is spot on, I need a cash injection.

So I tried Santander and Sainsburys who currently lead the market as two of the best lenders with a headline (note thats headline - not by a long shot the rate you will get..!) rate of 7.4%.

I made the Sainsburys application online and then followed up with a phone call - they didnt mention at any point PPI and said this was because I opted out during the online form process. Fair enough and quite right ... because I did opt out and have no interest in this insurance.

Contrast this with Santander. This application was made over the phone and took an agonising 35 minutes to complete. On at least 5 occasions sprinkled across a carefully crafted sales script PPI raised its ugly head. They very slyly kept reminding me that I should think twice before taking on a debt like this without adequate protection bla bla... how safe is my job etc. Safer than yours my friend I thought but it doesnt pay to tick these poor kids off and as I want the loan I kept my mouth shut.

The worst of it was when the helpline chap dropped a very subtle hint that my loan application might be adversely affected if I didnt explore the PPI product.

As if that wasnt arduous enough I have been told to expect a follow up phone call revisiting the key aspects of my (successful) application and when I asked whether this too would involve a PPI  chat ... I was told that it almost certainly would.

So in short - Santander are pushing PPI massively.
It is hard sell.
It is a slick hard sell
.. and its relentless.

Now given that the cost if 20% of the loan repayments (but 5% to buy independently) you understand why they ram it down your throat. Add to this the low payout rates of 11% on credit card PPI (source: Money Saving Expert) you can see why its a real bonanza for the banks and insurers.

Maybe the industry has cleaned up its act but frankly this experience makes me think that they just sharpened their tactics and got smart. They make you feel you really need to buy PPI and shouldnt progress without it.

Isnt that what got them into the PPI mess in the first place..?

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