Loan insurance changes could raise cost of loans
The latest sour grapes comment from lenders, is that the price of personal loans may have to increase, following the competition Commissions recommendations that Loan Insurance should be banned when sold alongside a credit agreement.
The lenders would do well to avoid making such outrageous statements, which fly in the face of the governments wishes to keep the cost of credit down.
The Loan Insurance market, which falls within a type of insurance known as PPI market is worth around £5bn a year in premium income.
The Competition Commissions final report is due out in January 2009, and it looks like they are sticking to their guns and insisting that firms; that’s credit providers and intermediaries, wait for 14 days before contacting a customer to see if they want to buy loan insurance, which covers debt repayments if the holder is made involuntarily redundant or cannot work due to accident or sickness.
Yes, of course firms selling loan insurance are not happy with the situation, however threatening to pass the loss of this income stream on to customers through more expensive loans, is just sour grapes. Lenders have simply had it too easy, for two long and have been selling polices which are half as good as those that can be found stand alone; at almost double the price.
The Commission’s ruling has to be a good thing for the consumer and the timing could not be better based on the economic outlook for 2009.
