Lloyds Raise Insurance Fraud Budget To 12 Billion
This type of story is quickly becoming recurring news in the insurance sector. Lloyds Banking Group are increasing their budget once again for their customers who have been miss-sold various types of loan insurance over the past decade. The banking group have had to add hundreds of million more pounds to their budget in order to cover these costs, taking their total to over £12 billion.
Lloyds have already had to set aside £11.3 billion pounds to pay back customers that have been miss-sold PPI (payment protection insurance) which is miles more than any other bank. These insurance policies are actually very useful, but only when they are sold to the correct customer. PPI is meant to protect consumer’s loan repayments if they fall ill or lose their jobs. However, the banks have been selling these insurance policies to people who would never be eligible to claim due to the policy wording.
Lloyds had already taken a £900 million PPI hit by the time of their third-quarter results in 2014. These figures are likely to double providing that the level of complaints stays the same over the coming months. As expected, the number of PPI enquiries has shown no signs of slowing. The British financial regulator has released figures showing that £376 million was paid out in October alone which is a 7.4 percent increase on the average monthly pay-out of the previous 3 months.
Numis brokerage analyst Mike Trippitt said: “Lloyds will take a further £500 million hit for PPI miss-selling for the fourth quarter of 2014, but other sources think that the charges could be even higher.” Lloyds are expected to explain their extra charges in detail when they report their results for 2014 later this month (February 27th). Other banks are probably going to have to increase their budget as well which will bring the banking industry’s total bill to £24 billion.
James Savery, 04 February 2015