could this be PPI??

It is not somehow wrong simply to have insurance.

You have insurance against ill-health preventing you from paying your mortgage. On what basis are you going to complain that you don't need it?

If the insurance is going to be refunded, it needs to have somehow been mis-sold to you.

he mentioned PPI could also be known as something along the lines of income sickness insurance/benefit.

There are some types of PPI that label themselves as income protection. However, the mainstream form is a PHI policy rather than a PPI policy. Very different in structure and process.

Which has got me thinking, when I took my mortgage out 9 years ago I was advised to take out a policy called income assured plus with the Cirencester friendly.

That is PHI. Not PPI.

Could this be PPI sold under another name?

No. Nor is your car insurance, house insurance or life assurance.

I did claim on it, but when i was off work and the time i went back, i spent more on payments over the 3 months than i got from this company for my claim.

Which of course can happen with insurance. Some people never claim. Others claim for a month or two or decades.

They then turned around and said as my work paid 50% of my wages then could only add on 10% (it may could've been 20%) said something about government rules, something that wasn't discussed or mentioned.

Over the years the rules changed but yes, the Govt did have rules that prevented you from receiving more than 60% of what your gross incom if you were ill. However, that was only for the short overalap period whilst the employer benefits were being paid. Once the employer stopped, you got the full amount of the insurance after that.

I cancelled the policy straight away as i felt they ripped my off, they cheekily replied to my letter asking to rethink about cancelling as i was a valued customer.......

They didnt rip you off.

When the plan was set up, you get a choice of deferment period and the aim is to get as close to matching the employer benefits as possible. e.g. if the employer pays out for 3 months full pay then the deferment period should be set to 3 months. The problem is when the employer pays out 50% for a period, its usually only short term and not all providers will offer split benefit. So, you get to choose wether to extend the deferment period to the end of the 50% period or accept a short period of overlap.

So, no wrongdoing here. Just a lack of understanding of how it works