4 types of Payment Protection Insurance for SMEs

Friday, January 18, 2019

business PPI SME

Financial crises are part of life. It doesn’t take a brokerage house crash like the Wall Street crash in 1987 to bring about financial crises. These events are a common occurrence; some are bigger than others with more visible consequences.

Since the 2008 financial crisis, quantitative easing helped the banks. Some of the UK financial institutions such as Royal Bank of Scotland (RBS) and Lloyds were saved with taxpayer money, in order to support the UK economy and help ease the banking sector crash.

Now, imagine you own a small-medium business.

Why didn’t you get the same quantitative easing like the banks did back then?

Bankers and traders are the ones who have been rewarded to take risks with other people’s money. This has intensified any financial downturns in the past decades with the most recent one occurring in 2008. During that time, only the most credit worthy companies could get access to capital, private equity or hedge funds. Self-employed and SMEs, although they drive so much job creation on a local and national level, were suffocated by the credit markets and left with no option but to either put a percentage of their business in equity or close down. On several occasions various investors were actually lending to high-risk SMEs and to fund buy-out deals – the so-called “covenant lite” loans.

Some of the small and medium businesses tried to make use of their payment protection insurance (PPI) during that difficult time. Business PPI was sold alongside secured and unsecured loans, overdrafts, credit cards and mortgages – just like an individual PPI policy. Business PPI also came in a variety of names, including:

  • Business Loan Repayment Insurance (BLRI)
  • Business PPI
  • Commercial PPI, or
  • Corporate Overdraft Repayment Insurance (CORI)

The PPI policy was sold on a widespread scale by the Corporate Relationship manager or “Risk Solutions” specialists of the bank of choice as an efficient solution for businesses and covers their existing loan with the bank. However, when SME owners tried to increase their loan credit during the credit crunch to not miss their loan payments, the policy was not valid.

Banks, when advising people on insurance, should have ensured that the product is suitable, as well as making it clear the policy is optional. Owners were initially informed the policies can increase the change of loan release during the time of application and some even found it within their receipts and believed to be just additional service costs.

How to find out if you have mis-sold business PPI ?

Unfortunately, it is not as easy to find out if you could have a claim for Business PPI as it is for an individual.  The banks do not have the same processes in place for businesses as they do for individual, and finding out might involve Suspicious Activity Report (SAR) or Request For Information (RFI) submissions.

Any claim that is made on behalf of a business lies with the business entity and not an individual (even when the policy was taken out in an individual’s name) so the company must not be dissolved. If the business is in administration, you can still make a claim however any payment will be used to pay creditors.

A successful claim may result in a full refund of the premiums plus statutory interest.

There’s a PPI deadline you need to be aware of.

The Financial Conduct Authority (FCA) has imposed a deadline on all PPI claims (consumer and business) of 29 August 2019. If you don’t start your claim before the deadline your business could miss out on thousands of pounds. To talk to one of our specialist advisers, fill out the form online or call us free on 0800 083 0167 and we’ll be happy to help.