Last month a judgement slipped through the Newcastle County Court which could have major repercussions for the insurance industry.

The case related to a person who had been sold Payment Protection Insurance (PPI) by MBNA. The case was won on a technicality that will send shivers around the boardrooms of the companies that sold PPI.

The judge said that MBNA had created an “unfair relationship” by encouraging the client to take out PPI but failing to disclose the large commission that MBNA would earn as a result from the insurance company. Apparently, such an “unfair relationship” breaks new laws which were introduced in 2007.

As the judgement was delivered in a County Court, the case does not form a binding precedent but companies specialising in miss-selling compensation claims are rubbing their hands with glee. One claims company said, “This has massive ramifications. The unfair relationship issue is widely applicable as it underpins almost every sale of PPI”.

We think it probably applies to all other forms of insurance. Unless the seller informs the client of the commission they will earn, the case would seem to have been miss-sold.