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There's been a lot of talk about this insurance, but what is it?

Known as PPI, the insurance covers outstanding debts, usually in relation to loans and overdrafts.

Sounds like a good idea to me

It is good in principle, as it generally provides cover against illness, unemployment and other circumstances which would stop the borrower's repayments. 

So why the uproar?

Well some borrowers have claimed that they were unaware of these additional charges and were mis-sold this insurance as they did not really need it.

Is PPI any different than other types of insurance?

Yes, because it can be difficult to determine who does and who doesn't need it, whereas home insurance for example is relatively straightforward.

So is it fairly difficult to get insured?

It is not difficult to get insurance, but it seems to be difficult to claim under the policies. Many are rejected at quite an early stage.

So it's the lucky few who get through then!

You could say that, but studies have found that many of the PPI policy holders are completely unaware that they are insured, and this is the problem that has caused the recent uproar.

The banks must be worried

Well, Deutsche Bank estimates the total bill for compensating customers who were mis-sold will reach £8 billion, nearly double the £4.2 billion given by the Financial Services Authority. Lloyds Banking Group yesterday set aside £3.2 billion - just in case. 

How likely is it that the customers will see any compensation?

A court ruling last week estimated that those affected might receive, on average, £1,500 apiece.

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