“The news that the regulator is set to crackdown on the payment protection insurance (PPI) market is good news for the sector, for the wider financial services industry and most of all, the consumer.” says Sara-Ann Burgess of protection insurance specialist Burgesses.
Burgess adds, “Worldwide crisis in the credit markets and its knock on effect for banking and other financial services has brought it home to many people just how many people in the financial services industry have been treating their customers with contempt. Nowhere is this better exemplified that in the PPI market where poor performing products that generate massive commission fees have been pushed to unsuspecting customers. Investigations into the PPI market have been ongoing for some time. However, the FSA declared this week it is to escalate intervention following poor findings from its thematic review. It highlighted the sale of single premium PPI sold alongside unsecured personal loans as being of particular concern and advised stopping the practice altogether. Loan protection policies sold by high street providers are up to 12 times more expensive than other more keenly and appropriately priced covers in the market. We have been arguing for some time that this product is unsuitable in nearly every scenario and should be scrapped. It is unsurprising that the FSA has now come round to our way of thinking, it is just disappointing that it has taken so long and left customers open to further exploitation by unscrupulous lenders.”
The regulator is also to consider what action to take to deal with ongoing non-compliant sales practices and consider actions to identify and remedy non-compliant past sales, using a range of regulatory powers at its disposal.
Burgess said: “While stricter requirements in selling payment protection insurance would focus attention on the responsibilities that companies have to their clients, they must be introduced alongside a tighter line from the FSA over the frightening divergence in price that exists between the cheapest and most expensive products in the market. The FSA could regulate the products sold, take a much harder line on those found wanting, or stop credit providers selling only their own protection insurance. This would introduce greater competition and ensure a better deal for the customer.”
Income protection insurance: News update: October 2008