The main aim of the payment protection insurance is to ensure that the people are able to continue to pay premiums and instalment towards their line of credit product, even when the principal owner of the product is unable to pay the same for any circumstantial reasons. Many a times, it so happens that the person gets ill, loses job, or faces severe loss in the business for which reasons the buyer of the financial product is not able to continue to pay for the premiums of the payment protection insurance.
Payment protection ensures that the premium and the financial obligations for a stipulated period of time is paid on time for the line of credit it is purchased for, even when the buyer is unable to do so. This ensures protection for the buyer as well as the financial institution or bank that has provided the line of credit. The buyer does not get negative credit score, and the financial institutions continue to get the due payments on time. And, in the meanwhile, the person gets the time to find another job, recover from illness or recover from the financial loss.
Now, coming to how the PPI scandal got as big as it became when the payment protection insurance is actually a well-defined financial product. The answer lies in these few facts –
#1 People were never told they are being sold PPI. This is the immediate breach of trust, because banks were selling something that the consumers never wanted in the first place, and nor were informed about it, while still taking money for it.
#2 People were forced to buy PPI out of their will. Many a times, people were not willing to buy, but the banks’ representatives compelled them to buy by stating false statements like they are essential for the purchase of line of credit or financial product the consumers were actually interested in.
#3 PPI was sold to people who were not eligible to get PPI coverage or benefits. Many people who were overage or underage cannot get the benefits of PPI, but still the agents continue to sell it to them, regardless.
#4 PPI was sold to people who did not need it, or who already had other financial products covering their payments.
These are the few factors that made PPI scandal as big and got the PPI defamed. It was otherwise legitimate product and could have been a widely popular among people if the banks and other financial institutions would have sold it legitimately and not mis-sold it.