As far back as 2002 the financial regulator was warned about the Payment Protection Insurance (PPI) racket being operated by financial services companies and the banks in particular. But it has taken an investigation by the Competition Commission into the £4 billion per year market to come up with new rules about how the insurance should be sold.

From May this year, the sale of single premium insurance policies on unsecured loans will be halted. And from October 2010 no lender will be able to sell this type of insurance at the same time as selling a loan or credit card. For years these policies have been sold and the cost of the insurance added to the initial loan taken out. This has meant that the borrower has paid interest not only on the loan itself but also the entire cost of the insurance.

But the biggest problem has been that these policies have numerous “exclusions” which invalidate claims in specified circumstances. The problem is that hitherto many policies have been sold to people who would never be able to claim by virtue of the type of their employment. This means they may have spent thousands on worthless insurance. No wonder the Financial Ombudsman is being kept busy.

The new rules say that PPI can be sold but lenders will have to wait 7 days before approaching the borrower to take out PPI although if the customer requests for cover, it can then be sold 24 hours after the loan has been put in place.

The purpose of these delays is to avoid the borrower from being pressurised at point of loan sale to take the insurance and thereby allow the borrower time to search the market for a competitive quote. The changes will also make the variety of PPI which operates on a renewable monthly premium far more popular. And this, in our view, is as it should be.

You will therefore not be surprised to learn that Brokers Online only promotes renewable monthly premium Payment Protection Insurance with a policy which is organised by British Insurance, one of the market leaders.