UK financial institutions have agreed to change the way they sell payment protection insurance over the internet and, as a result, will no longer add the controversial insurance product to quotes when consumers apply for loans online, the UK Financial Services Authority said.

According to the regulator, lenders were offering loans on their websites where payment protection insurance (PPI) was automatically included, using techniques such as a pre-ticked box. The Financial Services Authority (FSA) highlighted the fact that this sales technique could lead to customers purchasing PPI without making an active decision to do so.

Firms have now agreed to change this so that the customer must actively choose to buy PPI.

Vernon Everitt, FSA director of retail themes, said: We have made PPI a top priority and are pleased that firms have agreed to change the way they sell PPI over the internet. Naturally, many customers are focused on getting the loan itself, but it is just as important that they also think about whether or not they want to protect their loan repayments by taking out PPI cover.

The FSA is due to report on its latest investigations into PPI sales standards in September 2007.