The Financial Ombudsman Service received a record number of complaints about payment protection insurance in January, making it Britain's most complained about insurance product.

The watchdog said it saw a steady increase in complaints about PPI, with a record 1,499 complaints in the last month alone. The service added it received only 1,832 complaints on the issue across the whole of the 2006/2007 financial year.

PPI cover is taken out to cover debt repayments on credit cards and loans if the holder loses their job or is unable to work.

However, the plan can be costly, and the £5bn insurance market has been criticised in the past amid claims it has been mis-sold to people who will never need it.

The new figures come after the Financial Services Authority launched a scheme to improve sales practices in the insurance market.

Emma Parker, a spokeswoman for the Financial Ombudsman Service, said: "There was a record number of complaints about PPI in January and the number is increasing month-on-month.

"The fact that so many complaints are being upheld suggests that firms aren't doing enough to deal with these complaints before they come to us."

Ms Parker added that one of the biggest area of complaints was from people who were unaware they had taken out PPI with their loan, while others were told they would have to get it in order to take their loan out.

Similarly, some people were told they would have to take out cover even though they were never likely to claim on it, such as people with pre-existing medical conditions and freelance workers.

Ms Parker said: "It bares comparison with the early days of endowment policy complaints, where firms were simply turning complaints down and leaving it to the Ombudsman to deal with."

The Ombudsman service has now said it was upholding 80% of the complaints it looked at, more than double the average of those normally investigated within the insurance sector.

The watchdog added it was working with firms as well as trade bodies to ensure firms follow the correct guidance procedures.

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