UK bank insurance mis-selling complaints jump in H1 ~ Finance Update

LONDON, Aug 24 (Reuters) - Complaints against controversial loan insurance by customers at two
of Britain's top banks rose by 25-30 percent in the first half of this year from the previous six months and may rise further in the current period.

Barclays on Wednesday said there had been a 25 percent rise in complaints about payment protection insurance (PPI) policies. Lloyds Banking Group, the biggest PPI provider, has said complaints rose 30 percent.

Banks face a bill of over 6 billion pounds ($9.8 billion) to compensate customers who were wrongly sold the controversial loan insurance, after the industry lost a legal fight in April.

Analysts are now watching the pace of complaints to assess the final scale of compensation. There are about 12 million outstanding PPI policies. Often the policies were sold to people who would never be able to claim on them.

Lloyds has made a shock 3.2 billion pound provision for compensation, Barclays and Royal Bank of Scotland each took near 1 billion pound provisions and HSBC set aside $509 million.

Overseas banks Santander took a 538 million pound ($887 million) hit and Bank of America has taken a $592 million reserve.

Barclays said it received 73,692 complaints in the first six months of this year about insurance and protection -- mostly about PPI -- up from 59,003 in the previous six months and up 93 percent from the first half of 2010.

It said it expected PPI complaints to rise in the second half of this year.

Lloyds said earlier this month it received 202,384 complaints about general insurance and protection in the first half, up from 156,014 in the previous half-year and more than double the year earlier level.

Banks have to issue complaints data by the end of August.

Barclays said its overall complaints fell by 9 percent in the first half from the previous six months to 251,563. Lloyds said its complaints were down 6 percent to 349,984.

($1 = 0.610 British Pounds)

($1 = 0.695 Euros)