OFT refers PPI to Competition Commission

The Office of Fair Trading has referred the Payment Protection Insurance (PPI) market to the Competition Commission for further investigation.

This market reference follows an initial OFT study into the sector and public consultation.

The Competition Commission will now carry out its own comprehensive investigation, to see if any features of this market prevent, restrict or distort competition and, if so, what action might be taken to remedy these.

The OFT say “Our examination of the evidence presented to date gives us reasonable grounds to suspect that there are features of this market which restrict competition to the detriment of consumers. Despite some evidence of a degree of consumer satisfaction with aspects of the product, the evidence as a whole suggests consumers get a poor deal.  This referral will enable the Competition Commission to undertake a thorough investigation of the market and, if necessary, ensure that appropriate remedies are put in place.”

The CC investigation is not limited to considering only the issues that the OFT has identified.

Those who gave evidence to the OFT argued that;

  • consumers pay excessive prices for PPI bought from lenders
  • the protection consumers buy is partial, with evidence of high-pressure and unfair sales tactics
  • the administration of PPI claims can be slow and unfair, and can leave consumers facing additional charges.

Sue Edwards, Senior Policy Officer for Citizens Advice says: ”We’re pleased that the OFT has now referred the UK Payment Protection Insurance market to the Competition Commission but we need swifter action to protect consumers."   

Pula Houghton, personal finance campaigner of Which?, says: ”This is clear evidence of an industry that is systematically dysfunctional. It confirms Which?’s view that expensive PPI products, often not fit for purpose, are being consistently mis-sold. Which? has said for years that bad practice is rife in the PPI market. It isn't delivering adequate protection and people are being sold complex policies that they don't understand, and which offer poor value. The CC needs to stop companies selling inferior products to people who don't know what they're buying.”

Which? offers the following advice: Consider income protection first, as this type of policy provides cover for long-term sickness, by providing an income up to retirement if necessary.

Nick White, Director of Financial Services at price comparison and switching website says: "It’s not surprising to see that the Competition Commission is now involved in this investigation as the high street banks and building societies currently account for 80% of all PPI policies sold. This is mainly because consumers are not shopping around and looking at the standalone policies which represent much better value for money. The fact that high street banks and building societys dominate the sale of PPI policies is understandable as they enjoy a huge point of sale advantage. Consumers must become better at being consumers, they need to shop around for the best deal while remembering that some policies have different features than others. They should always ensure that they understand what is covered in the terms of the contract by reading the small print and that the policy meets their requirements, whilst ensuring that they do not over-insure. Some policies automatically include life cover, but this could be doubling-up on insurance as the customers may have their own life policy already.”

Eric Galbraith, chief executive of the British Insurance Brokers’ Association, says, “BIBA welcomes the Office of Fair Trading’s decision. It is only once consumers are made more aware that PPI cover is available from sources other than the lender, and more providers, be they intermediaries or insurers enter the market.”


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OFT refers PPI to Competition Commission
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