The Payment Protection Insurance (PPI) mis-selling scandal that the UK banking industry is still paying for is forecast to be costing them somewhere in the region of £15bn.  Is the value of premiums on mis-sold policies really as high as that, and why was mis-selling so rampant.

In my time at a leading UK bank I actually had management responsibility for PPI for card products so I can offer some insight into the latter.  As for the former, and I observe without any involvement at all in the ‘unravelling’ process, I have the thought that it is the costs of the ‘ambulance chasers’ that are ratcheting up the costs (I get frequent calls from them despite never having had any PPI).

Now if this is so then the two questions posed above start to merge just a little.

My management of PPI was essentially management of the third party provider of the service for our bank.  We had regular meetings and open channels to discuss performance and I was also able to listen in to the third party provider’s employees (without them knowing it) as they tried to sell customers insurance protection.  Now, when you outsource you rely on your outsourcer to provide a good service so it’s fair to say that I didn’t listen in to that many calls.  But those I did, boy, did they make me squirm.  At least 50% of the time a successful ‘sale’ was made it was perfectly evident that the customer was completely unaware what they had agreed to and certainly didn’t think there was a cost attached.

I am pleased to be able to report that I can take the moral highground here as I raised this with the outsourcer’s management team immediately and made it clear that the practise was unacceptable.  However, moral highground is all fine and dandy but it didn’t change anything because, you see, these companies typically have short tenure employees that gain commission on sales (fostering a mindset of ‘get in quick and get out quicker’), and, the Company has volume targets to meet.  So, it was really a recipe for disaster.

But, I was under the impression that all the calls were recorded so (unless the call recordings are only kept for a limited time) I am wondering why the banks arn’t reviewing the sales conversations to establish precisely which policyholders were mis-sold to and reimbursing them rather than forking up extra money to cover the ‘ambulance chasers’ costs.