Almost two million payment protection insurance (PPI) policies have been mis-sold according to consumer organisation Which.

Their report found that up to two million borrowers who took out loan protection insurance may have been mis-sold the policies, representing almost a third of all policies sold before the end of 2006, much higher than previously thought.

The findings come days before an expected crackdown by the Competition Commission on the way these policies are sold, following a two-year investigation by the Office of Fair Trading.

Payment Protection Insurance (PPI) is designed to protect customers if they are unable to make repayments due to sickness or unemployment, and is usually sold at the time of buying loans and other credit.

Lenders make an estimated £5.5 billion a year from the policies, but, it is claimed, rarely have to pay out because of a series of exclusions – PPI typically only pays out on 20 per cent of claims.

Complaints about this type of insurance have rocketed, and the Financial Ombudsman Service is understood to receive around 2,000 complaints a month on this product alone since the beginning of the year.

Self-employed policy holders or those with pre-existing medical conditions are generally excluded, but many will still have been sold the cover. Workers on fixed-term contracts and the over 65s are also amongst those not covered.

Chiltern’s Nathan Gladwell says: “It’s scandalous that people have been be mis-led to take out insurance that doesn’t cover them at their time of need, and often costs almost as much as the loan itself.

“Chiltern can provide you with free help and advice on how to reclaim your money from a mid-sold policy.”