Single Premium history? Can anyone answer?

marshallka

When did single premiums first come about and who was the first Bank to introduce them? (or finance firm)

Is there any justified time when a single premium would be better for a consumer (due to cost being the biggest factor) when already in debt?

Being trying to find an answer to this one and cannot find any info when the first single premium was sold?

~Brock~

I worked for a bank for about 5 years, starting in 1982, and single premium PPI was the only type of PPI available on personal loans at that time.

Single premium policies provided certainty of cover, because they did not get cancelled like a regular premium policies does if the payments lapse.

marshallka

~Brock~ wrote: »

I worked for a bank for about 5 years, starting in 1982, and single premium PPI was the only type of PPI available on personal loans at that time.

Single premium policies provided certainty of cover, because they did not get cancelled like a regular premium policies does if the payments lapse.

I realise what you are saying Brock but surely the reason they did not get cancelled was that cancelling of them did not reduce repayments by what amount you were actually repaying towards the PPI so a tad unfair I would say. Rebates were only on the premium and not on the interest charged on the premiums so again unfair.

Even with having the single premiums they mostly did not pay out when claiming on them (I think it was something like 15% of claims actually paid) and the banks would have known of this ages ago but continued to sell them. I could not see that security was their reason there?

src007

~Brock~ wrote: »

Single premium policies provided certainty of cover, because they did not get cancelled like a regular premium policies does if the payments lapse.

This is one small advantage, as the premium are paid up front, in theory you can use the insurance even if you miss payment and go into arrears.

Although, I've seen at least one single-premium, where if you go three months into arrears you can no longer use the policy anyway.

They justify the low rebate by saying that there's more ''risk'' at the start of the loan and so they should charge more.This almost make sense when you think of the life element. If someone (sadly) dies at the start of the loan, far more will have to be paid by the insurer, than at the end (when the loan is small).

However they were making far more than they needed from the monthly payments alone to need to recoup anything on early settlement and what percentage of people die during the loan term anyway? And most of the insurance only covers the monthly payment and not the lump sum of whats owed.

These small advantages were completely abused by the blatant profiteering.

I think they used the 'rule of 78' with PPI although this still confuses me.

A few policies didn't have any rebate whatsoever. I really don't know how how they justified that?

What I want to know is who designed these things? They must have been quite intelligent, which is all the more damning. :rotfl:

~Brock~

IMHO single premium insurance products were quite well suited to the market they were originally designed to operate in - fixed term unsecured loans. They covered a known amount at a fixed price. There was no chance of premiums increasing during the term and they were not an individually underwritten product, which meant that an older person could still get cover at reasonable terms.

Over the years many undesirable elements crept into these policies: eg

Selling them on loans that were for a greater term than the cover itself
Less than fair rebate terms
Overpricing for the risk involved.

However I do believe that the fundamental purpose and design of these products is sound. Rather than banning them altogether the issues such as those above should have been regulated out of existence. That would have left the key advantage without the main disadvantages.

I know everyone bangs on about how bad they are but the bottom line is that certainty of cover is still an important quality for some people and that element of consumer choice has now gone forever.

Also, the convenience of having one monthly payment to cover everything is worth a lot to many - particularly those who sometimes strugge to budget. The concept of 'shopping around' that the CC was so obsessed with, doesn't work with many and they simply will not pursue the idea of arranging cover separately. Even if they did the policy would possibly lapse once the direct debit bounced at the bank.

The damning of the entire concept of PPI has not particularly served consumer well in the long run. It has clearly been widely missold - and that needs to be rectified - but I don't think that the product will ever return at all in any meaningful format, which probably also means that credit will be both priced and made available according to risk, with those at the bottom finding themselves excluded.

You could try and offer a compliant product in a compliant manner today, but in a few months time you will still have an army of ambulance chasers trying it on with their fabricated allegations. The win or lose you pay anyway structure at FOS I would imagine puts most firms off even bothering nowadays.

Sensible debate invited!

marshallka

But they did not pay out when claimed on. Surely when someone is already crying out for a loan (which says "I am in debt") the worst things to do would be to put more debt upon them by charging interest on a premium paid up front. I cannot see the point or that only to profit the sellers/insurers.

dunstonh

Single premium has never been considered right for MPPI. My first experience with it on mortgages was in the 90s with double glazing firms arranging finance. However, on personal loans I recall it being there in the 80s.

The damning of the entire concept of PPI has not particularly served consumer well in the long run. It has clearly been widely missold - and that needs to be rectified - but I don't think that the product will ever return at all in any meaningful format, which probably also means that credit will be both priced and made available according to risk, with those at the bottom finding themselves excluded.

We are seeing it already on these forums where you get some posters thinking that they are entitled to get their money back just because they have PPI. That is clearly not the case.

What we may see is an increase in quality of the basic/budget versions of PPI which had way too many exclusions. The better quality PPIs that do cover self employed and do cover unrelated illnesses to pre-existing conditions dont have the level of problems. Although its clear that most consumers dont have a clue that the differences exist and assume the worst.

marshallka

dunstonh wrote: »

Single premium has never been considered right for MPPI. My first experience with it on mortgages was in the 90s with double glazing firms arranging finance. However, on personal loans I recall it being there in the 80s.



We are seeing it already on these forums where you get some posters thinking that they are entitled to get their money back just because they have PPI. That is clearly not the case.

What we may see is an increase in quality of the basic/budget versions of PPI which had way too many exclusions. The better quality PPIs that do cover self employed and do cover unrelated illnesses to pre-existing conditions dont have the level of problems. Although its clear that most consumers dont have a clue that the differences exist and assume the worst.

But during the investigations from the FSA that were going on because of the super complaint about PPI (single premiums) it showed that PPI of this type was not ever really in a consumers best interest so why should people that have a single premium not be entitled to get their money back regardless. The cost was notably higher than any other PPI (because interest was added) and it MOSTLY DID NOT pay out because of exlusions anyway.

The banks and finance companies should always act in the customers best interest at all times and selling something purely for profit is not. There was no other reason they were sold in my eyes. You could not switch with a single premium without being charged a lot of interest and a lot of the premium also so they had you trapped. Insurance should be about choice and it was not a choice.

Why did they have to ONLY offer a single premium? PROFIT, PROFIT, PROFIT and nothing else. WHen someone is in debt they do not need more needless debt thrust upon them do they?
If you total the PPI and interest on the PPI and then work out what you would get back if you were to claim on it, it often was the case where the PPI cost more than what you would get in return. Surely that is not justifiable?

I am just trying to understand??

dunstonh

But during the investigations from the FSA that were going on because of the super complaint about PPI (single premiums) it showed that PPI of this type was not ever really in a consumers best interest so why should people that have a single premium not be entitled to get their money back regardless.

The SIB never had a problem with it. The PIA never had a problem with it. The FSA never had a problem with it until overnight they did. They should have told firms that they no longer consider it appropriate and change it.

The banks and finance companies should always act in the customers best interest at all times and selling something purely for profit is not.

The banks are not charities. So, whilst they shouldnt do anything that is wrong (and telling lies to get people to take stuff out is wrong), the single premium issue is a little unfair on them in that the regulator has a change of mind after 30 years and decides to apply it retrospectively.

Why did they have to ONLY offer a single premium? PROFIT, PROFIT, PROFIT and nothing else.

Maybe in later years but in early ones it was mainly due to systems and they way things were set up. i remember doing the processing for the insurance and it was paid to the insurer as a single premium, not monthly.

WHen someone is in debt they do not need more needless debt thrust upon them do they?

You are talking about a minority there. The majority choose to take on a loan and are not in unsustainable debt.

src007

~Brock~ wrote: »

Over the years many undesirable elements crept into these policies

~Brock~ wrote: »

Rather than banning them altogether the issues such as those above should have been regulated out of existence. That would have left the key advantage without the main disadvantages.

I understand where you’re coming from but the undesirable elements completly eclipsed any benefits with this product.

Single-premium PPI should have been banned long before it was. I know some benefits had to be lost in the process but regulating the banks just wasn’t working. Even towards the end of 2008, after YEARS of increased regulation, ICOBs + fines etc they were STILL selling ridiculous policies. The likes of Blackhorse and Bank of Scotland were STILL selling 6-7k policies with 10k loans.

~Brock~ wrote: »

The damning of the entire concept of PPI has not particularly served consumer well in the long run.

I think this is true. The trouble is that most people don’t have a clue about finance and put their trust in the salespersons recommendation. Clearly (some) providers completely abused that trust and its understandable that people are going to ‘opt out’ rather look for a good deal, as their faith in lenders has been destroyed by this. It’s regrettable when people really need the cover but it’s understandable that people are going to opt out when they’ve had such bad experiences.

~Brock~ wrote: »

The win or lose you pay anyway structure at FOS I would imagine puts most firms off even bothering nowadays.

I understand how unfair this must seem to compliant firms however if mis-selling occurs on an industrial scale then you’re going to create industrial problems. This isn’t the FOS’s fault.

PPI got to insane levels – just one example - the Funding Corporation sold a policy that cost, including interest (I kid you not) £41,000 when the loan it was coving was just £50,000. This was for a 60 month policy on a 20 year loan. To break even on the deal you would have to claim on the policy for 83 months!!! :rotfl:

Where the culture at some lending institution views success purely as profit margins, rather than quality of service and advice, no amount of regulation is going to keep them in line, as they’re always one step ahead of the regulator.

If the FSA didn't act, thats damning on them but it doesn't excuse the banks behaviour. I can't see any ''retrospective regualtion'' and neither could a certain person at the high court. :rotfl:

The Judicial Review was like a criminal taking a police officer to court because he was arrested.