The problem is not necessarily with the concept of Payment Protection Insurance itself, but in the way in which it has been sold to millions of consumers. Banks and lenders alike profited massively from the sale of PPI policies, with an estimated 20 million such policies in existence in the UK. These PPI policies amounted to around £5 billion in revenue each year for the companies involved.
Mis-selling is the core reason for many of the PPI claims taking place and includes situations in which borrowers have been sold policies without being aware of it or even being led to believe that taking PPI with a loan, credit card or mortgage was compulsory or would increase their chances of a successful application.
Another common issue was that of people who would never realistically be able to claim on a PPI policy being sold one anyway! Most PPI policies states that those who are self-employed, unemployed or have certain pre-existing medical conditions at the time of taking out the loan or financial product are ineligible for the payment protection. However, there are a number of cases where people who fall into these categories have still been sold the policies irrespective of the fact they would never be able to claim.