Insurance on P2P Lending

Malthusian

I did note the other side to LendingWorks' insurance, but for the sake of conciseness I decided to skip to the point that if you want an investment covered by an insurance scheme, you should only be considering FSCS-protected deposit accounts.

The first thing I will say is that it isn't a bad idea in principle. Indeed, it's common for banks and mortgage lenders to insist that borrowers take out life insurance to cover the loan. So it may be new to P2P but it's far from a new idea.

The second thing I will say is that any investor who is attracted to Lending Works because of the "insurance" shouldn't be investing in P2P.

The third thing is that it is essentially PPI reinvented. People who borrow money from Lending Works are forced to take out ASU and PHI insurance. This insurance is priced into the cost of their loan - the difference between the rate they'd pay Lending Works and the rate they'd pay a different lender who didn't insist on this insurance. (Lending Works isn't providing it for free.) If they borrow from Lending Works, they have to pay for the insurance even if they're never going to be able to claim on it. How is this different from PPI?

firestone

Part of the problem with PPI was how it was sold - such as under pressure or with bad advice or to people not being eligible in the first place .Hopefully Lending Works will have addressed that issue having been forewarned