Payment Protection Insurance (PPI) is an insurance policy that is supposed to cover your debts if you have the misfortune to be unable to work due to an accident, sickness or unemployment. PPI was often sold along the financial products that it was designed to cover, such as mortgages, loans, store or credit cards. However, numerous financial institutions mis-sold PPI to customers, with one of the major problems being that sellers did not fully assess customers' employment statuses. For most policies, even though the customer is working, the following employment statuses are not covered:
- Self Employed
- Agency Workers
This means that if customers fall into one of these categories and had PPI, any claim that they made on their policy would be rejected. Essentially they were paying for something that they could never use. Below we explain why these statuses are excluded by providers.
Self Employed The self employed are often excluded because they are able to set their own hours of work and often have a say as to when they will be in and out of work. This makes it difficult for insurers to ascertain what their normal hours and pay would be, and therefore the level of payout required. Most insurers choose to exempt the self employed from policies to avoid having to deal with this.
Agency Workers Although agency workers are employed by an agency, each individual job that they have is a short term contract. Because of the nature of this and the likelihood that there could be significant gaps between contracts where customers would need to claim on their PPI policy, providers will not insure agency workers.
Unemployed If you are unemployed, it is obviously not possible for you to be off work due to an accident, sickness or to be made redundant because you are already not working. A PPI policy would be completely worthless because you would never be able to make a PPI claim. It may seem obvious that taking a PPI policy when you fall into one of the categories above would be pointless in most cases, however, many financial institutions did not clearly explain this to customers and instead, grossly mis-sold the product.