The bank has so far paid £5.3bn reimbursing customers.

Helen Weir, now the finance director at John Lewis, said she acknowledged the mis-selling of the product, but said she believed it was it had a role to play in protecting people’s finances.

Weir, who headed the retail arm at Lloyds between 2008 and 2010 and was the bank’s chief financial officer before that, was speaking in front of the parliamentary commission on banking standards.

“I acknowledge the mis-selling of PPI across the industry and at Lloyds and apologise wholeheartedly for my part in that,” said Weir who also admitted sales of the insurance had subsidised loss-making unsecured loans.

“What I am very clear about, both from research and from listening to customers, is that this was a product that met very important financial needs for customers who wanted peace of mind were they to fall into difficulty.”

She added: “on a number of occasions customers would say they wanted this product”.

Last November, Lloyds set aside a further £1bn to cover compensation for customers who were mis-sold PPI, bringing the bank’s total compensation bill to £5.3bn so far.