Can you reclaim PPI when a claim has been made?

willyjohn

A friend of mine who is somewhat lacking in financial acumen took out a five year loan with Lloyds. Unknown to her this included "up front" PPI of £1600 (on a £5000 loan!). After surgery, she was unpaid for 4 months whilst recovering from the operation. She was somewhat desperate for money and a friend of hers pointed out that she had PPI. As a result of this she claimed, and, 6 months after the claim and 2 tonnes of paperwork later, she finally received the princely sum of £500 from Lloyds. The original loan was cancelled and transferred to a new loan. She wrote to the bank stating that she no longer required PPI for the new loan but they replied that as she had claimed, the full PPI balance for the old loan, £1600, would be added to the new loan principal. Basically they told her that she could not cancel the PPI and referred her to her "terms and conditions" policy booklet. She had paid more than £500 in PPI premium and interest before the loan cancellation (charged monthly). Surely there is no such thing as an insurance contract that cannot be cancelled if you have made a claim? This seems to be both illegal and unjust to me and I have suggested she takes the case to the FOS. Any one have a simlar experience please?

dunstonh

Surely there is no such thing as an insurance contract that cannot be cancelled if you have made a claim?

Of course there is. Major examples are car insurance, life assurance, critical illness insurance.

I have suggested she takes the case to the FOS.

You cannot complain straight to the FOS. You have to complain to the bank first.

Morally, if you have made a claim on the policy you shouldnt receive a payout for mis-sale as you have benefited by having that policy. However, the FOS/FSA have some guidelines which does allow complaints to be made an potential payouts to be given if the PPI was set up incorrectly. However, the value of any claim paid out is deducted from the redress.