She comments: “Those born in the year of the ox could be forgiven for fretting about their financial situation more than others, it’s in their nature. However, there are proactive steps that can be taken to reduce the risk of increasing debt and I recommend everyone, not just ‘ox-babies’ who do not like living beyond their means, purchases PPI.”

Payment Protection Insurance pays out a pre-agreed monthly amount to meet a wide range of financial commitments such as mortgages, loans or any other household bills, should the policyholder lose their income due to unemployment, an accident or sickness. Premiums are calculated per £100 of benefit and policies can either meet mortgages and loans or provide a replacement income covering more extensive monthly commitments.

Sara-Ann continues: “Predictions for this year are not good – the Chartered Institute of Personnel and Development predicts 600,000 jobs will go in 2009 and the British Chamber of Commerce estimates that over the next two years, unemployment will peak to 3.1million – around 10% of the workforce.

“This coupled with insurer statistics showing that one in four adults are already struggling financially and over half have no savings left to pay bills should they lose an income illustrates just how important it is to proactively manage the potential consequences of the economic downturn. If a wage goes and there’s no money in the pot to pay bills, the consequences could be dire. PPI cushions that financial blow and relieves pressures created by bills for up to a year.”

Those displaying ox attributes – non extravagant and keen to know the schedule or timetable ahead – will undoubtedly suffer more angst this year as no job is ‘guaranteed’ with every sector suffering. They are no doubt amongst the 44% of Brits who according to researcher Mintel, lie awake at night worrying about their financial situation.

But they may not be one of the 3.7m people insurers identify as failing to cope with mounting credit card bills or the 1.02million who have borrowed too much and can’t keep up mortgage repayments.
Sara-Ann concludes: “The horoscope for this year warns that it is not the time to take risks and advises that people who take care to exercise good judgement will do fine. I believe those who take out a PPI policy to protect their finances in case of unemployment are exercising good judgement. Prudence and risk management shouldn’t be restricted to people born under the sign of the ox – everyone should adopt these principles.”

Those born in 1925, 1937, 1949, 1961, 1973, 1985 and 1997 apparently display ox attributes.

Low-cost PPI is available from a number of independent providers who are recognised as offering more competitive premiums than High Street lenders. British Insurance, for example, offers cover that’s 10 times cheaper for loan protection, four times for mortgage and five times for income. It has won numerous awards for its policies and the way in which it treats customers fairly and provides cover for home owners, those renting and people in shared

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Around 230,000 households receive Income Support for Mortgage Interest - ISMI - and the Government has now reduced the waiting period for payments from 13 weeks to two and pledged to support homeowners with mortgages up to £200,000 instead of £100,000.

However, payments of up to £40 per week are only available to those already receiving means-tested benefits such as income support or income-based job seekers allowance and with 11.7m households currently paying mortgages, Sara-Ann is fearful these revised Government thresholds will benefit only a few.

“Whilst I’m delighted to see the introduction of any initiative that helps people who lose their jobs, I fail to see how this will make any great impact. Fewer than 2% of homeowners currently qualify for ISMI and this change will not seriously increase this figure.

“More and more homes now have two breadwinners in order to pay bills and the state will not step in to help them if one half of that income goes. Payouts are means-tested which means only a handful will qualify for state support - this is why the Government is happy to extend its payout parameters.”

Insurer research suggests 61% of households with children are reliant on two incomes, supporting Sara-Ann’s viewpoint that millions of households will lose out if means-tested.

She comments: “Households across the UK are at risk of financial meltdown. More job losses equal less income to pay higher bills and there appears to be no substantial state measures to support the majority of people with mortgages, renting or in social housing.

“To help those who don’t qualify for state handouts, the Government recently recommended lenders allow customers pay off the interest rather than capital on their mortgage or extend the lifetime of their mortgage. But this does little to reduce the overall amount owed and is only for people with a home loan.”

Sara-Ann continues: “Alternatively, this week the Government suggested those struggling financially could sell their home to a social landlord or turn to renting. Not helpful - people need tangible help whatever their situation and I would like to see more Government attention given to promoting ways in which people can shore up their finances before they lose their jobs and end up with a debt disaster.”

Payment Protection Insurance is a policy that pays a monthly income for up to a year in the event of an accident, sickness or unemployment and Sara-Ann believes this product prevents people falling behind with their mortgage, social housing or rental payments.

“It’s a tangible, proactive measure that anyone can take out – the policy’s monthly payments can meet mortgage, loan or credit card commitments or replace a defined monthly income to cover a variety of household bills. You determine how much cover you want to buy, based upon per £100 of monthly benefit, dependent on your bills and how much you need to live on. No other support mechanism will pay your bills for a year and keep those debts at bay, and yet little is done to promote its benefits”

Exorbitant PPI premiums and mis-selling by a number of lenders and credit providers have tarnished the reputation of players in this sector, however Sara-Ann is confident independent firms will begin to experience a Renaissance.

She concludes: “Despite the actions of High Street lenders and more dubious credit providers, independent firms are being seen as credible sources for cover. People are beginning to realise that a product that pays bills for up to a year should they lose their job is something worth having.

“It’s a valuable recession-proofing tool and is easily sourced via independent providers who offer low premiums coupled with extensive cover and support services. PPI is a product that will make a bigger difference to more people in times of hardship than any Government initiative.”

Independent online provider, British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

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A growing number of firms are suggesting that the proposals put forward by the Competition Commission in November last year, calling for a 14 day ban on the sale of PPI alongside the credit provision, will cause greater financial hardship as consumers will forget to purchase PPI at a later date or not know where to source it independently.

Payment Protection Insurance pays out a pre-agreed monthly amount should the claimant lose his or her income due to an accident, sickness or unemployment, meeting loan commitments and other bills, dependent on the premium paid.

The Commission recommended a 14 day ban on credit providers selling PPI to their customers in response to an increasing number of consumers who have been ‘duped’ into purchasing expensive policies that do not meet their needs.

High Street lenders account for 70% of policy sales and their point of sale advantage has led to widespread anti-competitive practices resulting in more than 25,000 complaints being lodged with the Financial Ombudsman Service in 2008.

However, research undertaken by an online financial comparison site says two thirds of people believe they should be allowed to buy PPI at the same time as taking out a mortgage, loan or credit card and one in five adults - 6.5m people – will be less likely to purchase PPI if the Commission’s proposals go through.

Sara-Ann comments: “This clearly indicates people are unaware they are being exploited by their lenders and credit providers who often hide the cost of their cover in the overall loan calculation. If customers were treated fairly in the first place, the Commission would never had made these recommendations. I believe greater financial hardship will be caused if consumers don’t source PPI cover elsewhere.”

Independent providers’ policies have been found to be 10 times cheaper for loan protection, four times for mortgage and five times for income and often offer better benefits and support services
High Street lenders are widespread in their criticism of the Commission’s proposals, as they fear it will cut off a profitable income stream, and comparison sites have also recently condemned these measures, citing it will lead to people missing out on insurance.

Sara-Ann continues: “These people do not have consumers best interests at heart – they say they have – but if this was the case they would be applauding measures that give consumers greater flexibility and the option to purchase more extensive cover more cheaply.”

She counters: “I don’t believe consumers will forget to purchase cover and lose out as a result of a 14 day PPI selling ban. In this economic climate everyone is becoming more financially savvy and looking to save some money by shopping around - why should it be any different with PPI? Anyone taking out a mortgage, loan or increasing their credit will want to ensure they have the means to meet their monthly commitments and be able to continue their payments should something happen to their cash flow.”

Figures from recent online research show otherwise. MoneyExpert.com says only 26% of people have loan PPI cover, 37% have mortgage and 16% credit cards. Sara-Ann concludes: “All the more reason for providers and comparison sites to expend more energy on explaining the importance of PPI and signposting where they can purchase good quality, low-cost policies, independently. Getting a good deal is becoming a national mantra and the Commission’s proposals encourage PPI purchasers to adopt the same principles they do for other goods.”

Low-cost alternatives such as British Insurance, charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. It has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme.

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Having been quick to offer debt to consumers, Sara-Ann Burgess, a director at payment protection insurance (PPI) specialist Burgesses and longstanding campaigner for a fairer market, said it was now time to make sure borrowers had the right information to help them through the difficult times ahead.

She explained: “We have all been very quick to enjoy the good things in life in recent years and now the bill has arrived things are not looking so rosy. For borrowers that suffer the unexpected blow of accident, sickness or unemployment meeting their financial commitments is going to be very difficult.”

Burgess highlighted recent reports that up to two million homeowners were considering taking a repayment holiday on their mortgage as clear evidence of the financial stress that many households were under.

She said budgets would already be stretched by the demands of Christmas and was not surprised that so many people were looking to take a breather from paying their mortgage.

However she added: “If so many people are on the edge when it comes to meeting their monthly payments, they are unlikely to cope should they lose their job or be unable to work. I don’t think there has been a more important time to make sure good quality PPI is at the front of borrowers’ minds in the last 15 years.”

Against a backdrop of ongoing investigations into the PPI market, Burgess said there was a lot of negative sentiment to deal with, but felt that things were swiftly improving.

Burgess said it was down to every independent provider of PPI to make sure they were offering the value and flexibility required by borrowers and to get the message across that good quality policies were available and had a massive part to play in the future welfare of Britain’s borrowers.

“Some businesses have already played a leading role in this regard,” said Burgess. “For many years PPI providers like British Insurance have really banged the drum for a better market offering cheaper, more robust products that provide the cover borrowers need at a price they can afford. In essence, PPI is a relatively simple product and there is no reason it cannot be priced and sold in a way that creates a secure and solid safety net for borrowers.”

Too many providers had become greedy over the profits they could make in this market and had lost their way in terms of offering good value. Burgess said the PPI market now had an opportunity to put things right and had to take the time and effort to significantly improve its offering and make consumers aware of what was on offer and how PPI could help them.

“As consumer education improves I believe providers like British Insurance, that have led the way in this market, will have a significant role to play in safeguarding the financial future of millions of UK borrowers. Whatever happens the industry cannot stand by and let borrowers leave their debt unprotected and vulnerable to a surprise change in their circumstances.”

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Sara-Ann Burgess, a lifelong campaigner for a better PPI market and a director at industry specialists Burgesses, said: “‘If only we’d known,’ is so often the cry heard after a financial firestorm has ripped through our communities. Well now we do know and it is time to do something about it.”

Hindsight may be a wonderful thing, but it is nothing when compared to foresight and while there may be problems ahead, Burgess said that our knowledge of them should be used to full effect.

“Borrowers, financial advisers and product providers all know that we are in a recession and that 2009 is going to be a very difficult year. We have to prepare for that and make sure we can handle the turbulence that we are about to fly through. Things were bumpy in 2008, but for the average borrower it will be 2009 when the real problems come home to roost,” commented Burgess.

The warning came on the back of unemployment figures showing the number of people out of work was rising faster than at any other time in the last 17 years. In November, the number of people claiming Jobseeker’s Allowance jumped by an alarming 75 000. There are now 1.07 million people claiming the benefit, according to the Office for National Statistics.

The total number of people in unemployment, including those not claiming Jobseeker’s Allowance, now sits at 1.86 million and has not been this high since 1997.

It is expected that the upward trend will continue and by the end of the year the total for those out of work will breach the 2 million mark, with many worrying it may go on to smash through the 3 million barrier over the course of the coming year.

“Now has to be the time to make a concerted effort to board up our windows and make sure we can limit the damage done by the coming storm,” said Burgess.

“The PPI market needs to make a massive effort to get its message across and make sure borrowers have access to simple, well-designed and affordable products. Providers like British Insurance have been excelling in this area for many years and I desperately hope that more firms follow its example in the coming months.”

Burgess said there would be no excuse for the industry if it let thousands of borrowers flounder because of accident, sickness and unemployment and that now was the time to make sure borrowers understood what was available in the PPI market, how much protection would cost them and how they could put it in place.

“I would like to see an industry wide effort to use everything from the media to marketing campaigns to let borrowers know just how PPI can help. In a year’s time it will be too late for a lot of people. I would really like the PPI market to grab the initiative, shake off much of the negative press that has surrounded it and deliver for borrowers in the UK.”

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New figures from the Council of Mortgage Lenders (CML) predicts that those standing to lose their home will jump from 45,000 this year to 75,000 next – a huge hike of 67 per cent.

But Burgesses believes that the situation has been made worse by the failure of many mortgage brokers to give ‘best advice’ to their clients.

Sara-Ann Burgess managing director of the independent protection insurance specialist explains:

“The Financial Services Authority (FSA) placed with mortgage advisers and other financial services intermediaries an onus of ‘treating customers fairly’ in their dealings with clients. Any advice given by a broker to a client must therefore include identifying and offering solutions to any scenario where the client cannot afford to make the repayments demanded by the lender.

“The obvious solution to avoid possible repossession because the client is unable to make payments because of accident, sickness or unemployment would be to recommend the client take out insurance cover in the form of mortgage payment protection insurance (MPPI) or another income protection policy.

“It seems obvious from the poor take-up of these insurances, and the predicted massive rise in repossessions, that brokers were not doing enough to impress upon their clients the need to guard against the unexpected – such as an economic slump.

“If brokers cannot prove that they brought the existence of this cover to the attention of their clients, even if it was rejected, then it is conceivable that there may be grounds for legal action on behalf of the consumer against the broker since it could be argued that they had not been ‘treated fairly’.”

She added that the CML must shoulder some of the blame too.

“When the numbers of repossessions started to noticeably increase last year the CML maintained that it was nothing to worry about as it was rising from a very low base. That might well have been the case, but it ignored the rising trend to the point where it is now warning that it will reach 75,000 by the end of this year and might possibly rise even further.

“It is a bit late now to flag up the perils of recession and subsequent repossessions for stretched homeowners. CML members were guilty of reckless lending and to hell with the consequences. They are always guaranteed to get some return on the home loans they issue. But it is a different story for those that home loans were loaded on to. They stand to lose everything – job, home and possibly even their family unit because lenders made access to cash too easy in a rush for sales volume.

“The once booming buy-to-let market epitomised the greed of some lenders that threw money at this sector as if it was a one-way bet. It will be the tenants of those landlords that will pay the price of this unfettered greed by losing their homes.”

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The independent protection insurance specialist was speaking out following the publication this week of shocking new figures by the Office for National Statistics that revealed that unemployment is rising at the fastest rate for a decade.

Worryingly, the number of vacant positions in the wider economy has also contracted sharply creating an explosive cocktail of rising unemployment coupled with job scarcity.

The managing director of Burgesses, Sara-Ann Burgess, said: “Christmas is traditionally a time of giving – unfortunately all that is on offer for many workers this year are P45 notices and we can all do without them.

“And while the latest rise in the unemployment figures are depressing, it should be remembered that the thousands of people that have being made redundant in the last few weeks are not included and the actual picture on the ground is in fact much worse that these bald numbers show.

“But it is those newly unemployed workers that are also homeowners that will feel the cold depths of economic depression more than others. The threat of redundancy for them also entails the prospect of possibly losing the roof over their heads, should they be unable to find a replacement job quickly enough.”

People with property can, however, take action that gives them the best gift they could have in these troubled times – peace of mind.

“The best Christmas present that homeowners can buy for themselves is an insurance policy that guards against the worst-case scenario and they find themselves unable to make their mortgage repayments because of accident, sickness or unemployment,” advised Burgess.

“Mortgage Payment Protection Insurance (MPPI) can be bought relatively cheaply from specialist independent providers like British Insurance.

“However people need to act quickly. Insurers are already withdrawing the unemployment cover contained in traditional MPPI policies as they fear the recession will result in big exposures to claims.

“People also need to honest when taking out this policy, especially when it comes to declaring how secure they are in their current employment. Failure to be frank about this issue can leave insurers with a loophole to reject a claim.

“But cover can still be found and customers can search online where independent firms such as British Insurance has detailed information about the cost and extent of cover currently available.”

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The Competition Commission announced last week that it wants to see brokers banned from selling these products until at least a fortnight has passed from first meeting with the client. They can sell to the client providing he or she returns to them – advisers must not pursue the sale.

The client is however free to buy MPPI elsewhere after a 24 hour period has elapsed.

Burgesses believes that brokers have been abusing their position of trust with customers for some time. It hopes that the Competition Commission’s initiative will go some way to redressing the balance whereby the adviser has all the product knowledge coupled with the opportunity to put pressure on the client to close a sale right away.

Sara-Ann Burgess managing director of Burgesses said:
“Mortgage brokers have had plenty of opportunities in the past to clean up their act, but still many chose to go down the route of recommending products that are more suitable to lining their pockets than what is best for the client. They had no thoughts of compassion for customers that may eventually lose their house, only dreams of the hefty commission payments that would roll in.

“The Association of Mortgage Intermediaries (AMI) may claim that sales of MPPI made by their members is an ‘advised’ sale and is therefore made in the best interests of the client. But brokers became regulated almost by default and many retain the mindset of a previous era where TCF stood for ‘take commission feverishly’ and not ‘treating customers fairly’.

“As we move into a period of economic depression it is imperative that those people that actively seek to protect the roof over their heads by buying payment protection insurance are given the best possible advice and offered a wide range of appropriate products from a selection of suppliers – not simply pointed in the direction of those that pay the adviser the most money.

“Clients are often unaware that cheaper and better products can often be sourced and purchased on the internet from reputable providers such as British Insurance.

For these reasons I believe the Competition Commission’s move to restrict how brokers conduct themselves when selling MPPI products is both informed and welcome.”

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According to Sara-Ann Burgess, a vocal and continuous campaigner for improvements in the PPI market, widespread problems with PPI are putting a huge strain on the Financial Ombudsman Service (FOS) and putting it under significant pressure.

In turn, Burgess said this made it more difficult for consumers with problems in other areas to seek and receive fast and effective redress.

Burgess said: “The Financial Ombudsman has dealt with over 25 000 PPI complaints this year. This has clearly put a very significant amount of pressure on its resources and made it difficult for consumers with problems in other areas to receive the kind of attention and service they are looking for.”

In its latest newsletter, the Financial Ombudsman admitted it was facing problems and said that if businesses took a greater responsibility for treating their customers fairly, then it would not be needed to adjudicate in so many near identical cases.

The FOS said: “Responding to large-scale surges in complaints driven by ’single-issue’ consumer campaigns… is now becoming a regular feature of our workload. Traditionally, of course, the ombudsman’s role was seen as dealing with individual disputes relating to one-off issues. The ombudsman’s office was regarded as a kind of craftsman’s workshop – not a factory for mass-production.”

Burgess bemoaned the fact that the changing pressures being placed upon the FOS meant it was being forced into dealing with large scale single issues rather than being able to devote large amounts of time to more diverse problems.

She commented: “When the FOS has the time to research and investigate the wide range of problems that come before it, it acts as a final line of regulation, highlighting issues as they begin to appear. Unfortunately this function is being lost and the FOS is having to behave almost like a front line regulator because nothing is being done to effectively deal with high profile, single issue problems.”

Burgess said she agreed with the FOS when it said: “Of course, the ideal solution would be for all financial businesses to treat their customers fairly (and to put things right when they go wrong) – either because businesses recognise this is the right thing to do, or because of effective regulatory scrutiny.”

Looking towards 2009, Burgess said she hoped the Financial Services Authority and senior management in the firms under its remit would look to work more effectively together and deal with future issues before they swarmed out of control.

Burgess said both the regulator and financial providers had missed many opportunities to correct the problems in the PPI market and were now paying the penalty.

“Firms like British Insurance have been railing against many of the procedures in the PPI market for many years and the action that has finally been taken has been too long in coming. Had the market followed the lead of independent, ethical providers such as British Insurance and been quicker to take itself in hand, there would not be nearly so many consumers looking to complain.”

In the future, Burgess said she hoped issues would be dealt with much more quickly and effectively preventing the need for consumers in their thousands having to individually fight for redress. In turn this would free up the FOS to deal with the type of complaints it was set up to handle.

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According to the debt advice charity, National Debtline, an average of 23,000 calls have been taken each month this year and its total up until the beginning of December was 241,153. In 2007, 208,224 calls were handled and in 1998 this figure was 116,608.

The majority of calls in 07 were from people with debts relating to bank and building society loans, overdrafts and credit card or store cards and one in four owed between £5,000 and £15,000.

Sara-Ann comments; “In the space of 10 years the number of callers has doubled, indicating just how irresponsible lenders and credit providers have been. They’ve authorised loans and credit to people who may not have had the means to repay their debts within a given timescale and given their full support to those keen to follow the mantra ‘buy now, pay later’.

“It’s only now, amidst a recession, that common sense is prevailing – lenders and credit providers are not so free and easy with their money and people are being encouraged to live within their means.”

With unemployment figures soaring and news of redundancies now a daily occurrence, Sara-Ann believes anyone with monthly bill commitments should undertake some proactive debt management in the form of a PPI policy that will meet those commitments should they lose an income stream.

“No one wants to see an increase in calls to National Debtline next year, but if people don’t put measures in place now to protect their financial security, then the number of calls will continue to rise to unprecedented levels.”

In anticipation of increased pressure on charities due to soaring debt levels, the Treasury is releasing £5.85m worth of funding over two years, allowing National Debtline to increase its capacity with the recruitment and training of up to 50 debt advisers.

The charity, which is run by the Money Advice Trust, says it will allow it to keep up with demand for debt advice and expects a high proportion of calls next year to be from consumers facing redundancy or the threat of mortgage repossession.

Sara-Ann continues: “PPI helps prevent the mountain of debt piling up and so will reduce the number of people compelled to contact debt advice charities. It provides monthly payments that will meet some or all of your monthly bills, dependent on the premium paid, and the outlay compared to the return is miniscule - less than one family take-away a month.”

Independent PPI provider British Insurance charges £3.40 per £100 for unemployment cover, £3.90 per £100 for accident, sickness and unemployment and £1.90 per £100 for accident and sickness. A person looking to receive a benefit of £600 per month for up to a year should a job loss occur would pay a monthly premium of £20.40.

British Insurance has policies for home owners, those renting and people in shared ownership schemes and offers a back to work assistance programme. It has this year won a string of accolades for its policies and way in which it treats customers fairly.

Sara-Ann concludes: It’s great to see the Government pumping so much money into charities to help them cope with the demand for their services, but wouldn’t it be better to proactively manage the situation now, rather than offer to help consumers when they are struggling?

“Measures need to be put in place to manage the debt before it gets out of control - perhaps some of the Government’s funding should have gone towards helping the most financially vulnerable pay for a PPI policy.”

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