Consumer body Which? found that as many as 2million policies have been sold to people who may not be eligible for cover, because they fall foul of at least one “significant exclusion”.

PPI is designed to cover you if you fall ill, have an accident, or lose your job and can’t make repayments on your loan, credit card or mortgage.

Yet critics warn that not only can such policies be over-priced and filled with exclusions — but they are also often mis-sold to people who would never be able to make a successful claim under their terms.

Those who are self-employed or on a fixed-term contract, for example, are often not covered by their PPI policy and the same applies to those aged 65 and over, as well as to those who might wish to claim for absences relating to pre-existing medical conditions.

Policies are sold to those not eligible for cover

Which? estimates that around 6million PPI policies — about a third of the market — were attached to loans at the end of 2006.

“We have always known that people were being mis-sold PPI — but we were still amazed to discover the scale of it,” said Doug Taylor from Which?

 “It appears that salespeople are chasing commission and their bosses are chasing profits — where is the sense of responsibility to the customer?”

PPI is currently the subject of an investigation by the Competition Commission, while City watchdog the Financial Services Authority, is also conducting its own investigation to improve sales practices.

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