Competition Commission on home shopping payment protection insurance

The Competition Commission (CC) is consulting on changes to the way payment protection insurance (PPI) is sold by home shopping companies, and it is likely that these ideas will become law.

The CC outlines changes that will see clearer information provided to customers on the cost of retail PPI cover and their rights; unbundling PPI from other products and a requirement for providers to supply information to the new Consumer Financial Education Body (CFEB) for its price comparison tables.

PPI is a small part of the overall PPI market relating to protection taken out on repayments for shopping through home catalogues.

In May 2010, the CC decided that consumers would benefit from the introduction of a point-of-sale prohibition for all other forms of PPI, but provisionally decided to consider excluding retail PPI from this requirement. Although, like other forms of PPI, distributors of retail PPI face little or no competition when selling the product, the CC has not been convinced that in this case the advantages for retail PPI customers of introducing the prohibition would outweigh the costs-not least because research suggests that many customers are unlikely to search for alternatives given the relatively small sums typically involved.

The full list of proposed obligations for retail PPI is:

  • Must offer PPI separately from merchandise cover if both are offered as a bundled product
  • Must provide information about the cost of PPI and key messages in marketing materials
  • Must provide information to CFEB for publication and to provide information about claims ratios to any party on request
  • Must provide a personal PPI quote to customers before the end of the cooling-off period
  • Must provide customers who have spent more than £50 on retail PPI premiums in the preceding 12 months with a written annual review of PPI costs including a reminder of the customer's right to cancel
  • Must remind all active customers of their cancellation rights and of key messages on an annual basis

There will be a prohibition on the sale of single-premium PPI policies and on charges that have a similar economic effect.

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Competition Commission on home shopping payment protection insurance
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