Discussing the findings, FSA's managing director of retail markets Clive Briault said the body was "extremely disappointed" with the results.
He explained: "The right PPI can provide valuable protection for consumers, but they are entitled to expect that they will be treated fairly by firms when they buy it.
"They must be told how this product works, what it covers, and how much it costs. At the moment, too many firms are not meeting these requirements."
The findings were released as Prudential launched its new PPI package.
PruProtection's chief executive Shaun Matisonn said the PruProtect cover was created in an effort to counter "the negative image" of PPI packages in the UK.
Click here to run an energy price comparison, and see if you could be paying less for your gas and electricity.