Banks fork out £1.9bn for insurance mis-selling
Lenders paid out a record £441m in compensation for insurance mis-selling in December, taking payouts for 2011 to £1.9bn and raising the prospect of an even bigger bill this year.
The financial regulator said payouts in December jumped 16 per cent from the previous record of £379m in November. Aside from September, there has been an increase in monthly payouts every month since April, when banks lost a court case to end a long-running legal battle.
Banks may have to pay more than 6 billion pounds to compensate millions of customers who were wrongly sold loan insurance, and analysts are watching the pace of complaints to assess the final scale of compensation.
Payment protection insurance (PPI) policies were typically taken out alongside a personal loan or mortgage to cover repayments if customers fell ill or lost jobs, but they were often sold to self-employed or unemployed people who would not have been able to claim.
There are about 12 million outstanding PPI policies.
Lloyds Banking Group has set aside £3.2bn to compensate customers, and this week the bank said it would claw back past bonus payments to bosses who were in charge at the time of the mis-selling.
Barclays and Royal Bank of Scotland have each taken near 1 billion pound provisions and HSBC set aside $509 million (£324.8m). Overseas banks Santander took a 538 million pound hit and Bank of America has taken a $592m reserve.
Barclays said its PPI and general insurance complaints jumped to almost 123,000 in the second half of last year, up 67 per cent from 73,700 in the previous six months and more than double the 59,000 a year earlier.
That swelled its total complaints, which were up 12 per cent in the second half of last year from the previous six months. It had 533,000 complaints last year, down six per cent from 2010.
It is the first major bank to release its data. The Financial Services Authority will release complaints data for all banks next month.