Credit card and loan providers are not helping to sell payment protection insurance (PPI) to consumers accurately, according to an independent financial research firm.

PPI is purchased to cover interest payments on debt, usually just the minimum monthly payment, if a person's financial situation should suddenly change (eg with the loss of a job or illness).

However, lenders are failing to explain the details of these insurance policies correctly to customers, especially small print details which can dramatically affect whether a claim is successful or not, warns Defaqto.

Customers buying PPI are not filtered properly and are given little guidance on their policy which can include small print preventing claims from people with pre-existing medical conditions, bad backs, mental health problems or self employed.

"They assume that all customers are the same for insurance purposes. They then filter them out when they come to claim by rejecting those that were not really eligible," explained Brian Brown, associate director of Defaqto.

"They rely on when you tick the box you have read the tiny print about pre-existing conditions."

The Office of Fair Trading launched an inquiry in April 2006 to investigate the lack of clarity and high profit margins in the PPI industry.