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Both the FSA and the OFT on the 19th October published findings of their ‘collective’ work on phase 2 of the Payment Protection Insurance (PPI) market. Having reviewed 40 firms as part of their phase 2 thematic review the FSA has identified 3 key areas of widespread concerns within the PPI market:

• Many firms are still not giving customers clear information during the sales conversation.

• Customers are still not being made fully aware that there may be parts of the policy under which they cannot claim.

• Where customers are sold single premium policies, this is not always done with the best interests of the customer in mind – for example, where a choice between a regular or single premium is available, the sales conversation may be biased towards the single premium policy when the customer's circumstances suggest this is not the most suitable option.

The OFT signals its intentions to refer the PPI market to the Competition Commission

In light of their findings, the OFT will be referring the PPI market to the Competition Commissions (excluding store cards).

The OFT feel that consumers are failed by PPI as they generally receive a poor deal and often less protection than they expected.

Only 20% of PPI customers claimed on their insurance *

* Office of Fair Trading Payment protection insurance Report on the market study and proposed decision to make a market investigation reference October 2006

The FSA has begun imposing substantial fines on firms for failing to treat customers fairly during the sale of PPI. You can protect your business.

The overarching concern is that not all customers are coming away from the sale having been given the best possible chance of understanding that PPI is optional, what the policy will and will not cover and how much it costs. This clearly illustrates that the PPI industry has further to go to demonstrate that customers are being treated fairly.

“As we have made clear before, when sold properly PPI can provide valuable protection against changes in personal circumstances. But despite some improvements in standards, major weaknesses remain which go to the heart of the culture surrounding PPI sales.”

Clive Briault
FSA Managing Director of Retail Markets

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