Insurance sold to cover loan, mortgage and credit card repayments is to be investigated by the Office of Fair Trading (OFT).

The 'market study', starting early next year, is an official response to a 'super-complaint' lodged in September by consumer support network Citizens Advice about the cover, which is also known as payment protection insurance (PPI).

Possible outcomes include imposition of a code of practice; enforcement action against firms suspected of breaching competition law; or a full investigation by the Competition Commission.

PPI is generally sold with mortgages, loans, and credit and store cards. It offers protection for a borrower's ability to make repayments in the event of accident, sickness or unemployment.

But concerns over sales methods, policy exclusions and product complexity have persuaded the OFT that a study is needed. These factors point to a 'potentially high risk of consumer detriment' said John Fingleton, chief executive of the OFT.

Major issues include the difficulty of comparing PPI policies, lack of transparency of charges, high profit margins and low numbers of claims.

'PPI is a complex product, often bought almost as an afterthought,' added Mr Fingleton.

'Borrowers may shop around for credit, but the complexity of PPI and a lack of choice mean they are less likely to shop around for PPI. Our study will look at whether consumers are getting a good deal or not.'

Around seven million policies are taken out each year, the OFT said; in 2003, an estimated pounds 5.4bn was generated in premiums.

The OFT study is the latest spotlight to be trained on PPI. Last month, City regulator the Financial Services Authority published research suggesting that sales targets could encourage mis-selling and that there was a risk of customers who aren't eligible to claim on PPI, such as some self-employed workers, being sold policies.

The Competition Commission's ongoing inquiry into store cards has also warned that lack of competition makes it difficult for customers to find rival PPI providers.

Fraud

Cheque misuse to be checked

Consumers will no longer be able to pay cheques into their personal accounts if they are simply made out to their bank or building society.