Greater commission and claims ratio disclosure within the Payment Protection Insurance sector will have little impact on consumers’ decision-making, says independent provider Simon Burgess from British Insurance.
He believes PPI purchasers are influenced by the personality and persuasive skills of the seller and that compulsory disclosure of information, as recommended by the Competition Commission, is not an effective remedy - a view borne out by research recently undertaken by the London School of Economics. In its report “Information v Persuasion, Experimental Evidence on Salesmanship, Mandatory Disclosure and Purchase of Income and Loan PPI”, the LSE investigated the extent to which insurance sellers influence buyers and whether mandatory information disclosure would affect the sale. Results reveal that although consumers were keen to find out about seller incentives and the payout ratio of the policy, this information made no difference to the choice they made, and that in many cases, it reduced, rather than boosted confidence in their decision making. The LSE found that willingness to pay for insurance was based upon the seller and their powers of persuasion, rather than the information placed before them.
Simon Burgess comments, “We all know extroverts make more sales, whatever sector they are in, so the Commission should be tackling the pressure that is being exerted on vulnerable consumers, rather than recommending they wade through more information. I agree that consumers need more information to be able to shop around, but what use will it be when faced with a tenacious salesperson that convinces the consumer to keep the sale in-house? This research clearly shows that once consumers are in front of persuasive salespeople, they will end up buying the product whether they have more information or not.
“It is widely-known that staff at NatWest and Royal Bank of Scotland earn three times the number of bonus points if they sell a loan with PPI than on its own and these practices must be stopped. Consumers will not be protected by the currently-proposed policy reforms.”