A recent chain of events in the UK may be an interesting trend, and perhaps a lesson, for U.S. companies that sell specialty insurance products. The controversy is focused on a specific type of insurance, Payment Protection Insurance(PPI) that was typically sold alongside a loan and intended to help cover the loan payments if the borrower was unable to do so because of illness or unemployment.
What’s happened is that the industry got so carried away with the amazing margin and profits from the sale of these policies that they lost site of the consumer. Eventually, their behavior of overselling the product and denying claims got the attention of government officials, and they took action. Some of the UK’s largest banks are now staring at a mountain of ppi claims, potentially costing them billions.