Chris U’Dell

The Competition Commission (CC) released their Provisional Findings last month relating to the Payment Protection Insurance (PPI) market. Opening their news release with “Companies face little or no competition when selling Payment Protection Insurance to their credit customers and as a result customers appear to be overcharged by over £1.4 billion a year”, the CC has effectively drawn a line in the sand.

According to the CC, the majority of the 14 million PPI policies sold in the UK are sold at the same time as the customers take out a loan or other type of credit. With customers’ lack of awareness that they can use other PPI providers the distributor effectively has little or no competition. Hence the CC believes that the high prices are unfair.

The CC are reviewing this unfair advantage, consulting on whether it is necessary and appropriate to ban the sale of PPI at point of sale. The alternative is a follow-up sale which could dramatically reduce the number of policies sold, the premium that can be charged, and increase the cost of sale. This may prove unfeasible for most distributors and will reduce customers’ access to insurance products.

To enable other providers access, the CC is looking at: an obligation to provide information about credit products and PPI including balance details; a requirement for all policies to be renewed annually; and an annual statement reminding customers of the right to cancel with the early settlement terms.
The CC is also looking at additional remedies. These include standard disclosures relating to the cost; a statement of key messages which refers to other providers and highlights that PPI is optional and does not affect the credit scoring.

Yes, the PPI market does overprice their products relative to the benefits received, but surely whole scale destruction of the market is not the way forward? Customers deserve value for money. They deserve to decide for themselves who provides their PPI. And yes they need more transparency to make that decision. The role of the Competition Commission is to “ensure healthy competition between companies in the UK for the benefit of companies, customers and the economy” (source: www.competition-commission.org.uk).

Prohibiting the selling of PPI at the point of sale does not benefit anyone in the long term.

The Financial Services Authority (FSA) has recently fined Liverpool Victoria Banking Services (LVBS) £840,000 for misselling Payment Protection Insurance (PPI).

See the full story at Insurance Daily

The Government Equalities Office have recently released a white paper entitled Framework for a Fairer Future - The Equality Bill. The Equality Bill is aimed at effectively removing discrimination against all individuals and groups. Of particular interest to the Insurance Market is how it will affect products with an upper age limit.

The Equality Bill will enable us to make it unlawful to discriminate against someone because of their age when providing goods, facilities and services or carrying out public functions.

But before the public outcry starts there are standard exclusions!

It will not affect the differential provision of products or services for older people where this is justified – for example free bus passes for over-60s and priority flu vaccinations for over-60s or group holidays for particular age groups or actuarially justifiable age-based treatment in areas such as financial services.

A more comprehensive paper is due shortly.

Press Release: Business & Domestic Launch Across the Motorway Group

Business & Domestic Insurance Services have launched their innovative Lifestyle Protect Insurance product across the Motorway Direct Group, one of the fastest growing warranty companies in the UK since its launch in 1996.

“As a member of the Motorway Direct Group, we are delighted to be able to promote Lifestyle Protect through Motorway Directs 40 plus salespeople, focusing on their 1200 plus auto dealership partners” said Chris U’Dell, Managing Director of Business & Domestic. “We wanted to leverage existing customer relationships across the group where possible and where it is commercially viable. Lifestyle Protect makes sense for the dealerships. It compliments their existing portfolios by providing consumers with cover beyond their vehicle related benefits and provides a totally TCF product driven by customer needs and a great technology based solution tool to help the customer and sales professional gain the best cover for the customer.”

According to Business & Domestic, the distinguishing characteristic of Lifestyle Protect is its flexibility. Consumers may select the level of cover they need to help meet their regular monthly outgoings during a period of involuntary unemployment, sickness or disability. Lifestyle Protect also provides Life Benefit payments with absolutely no exclusions, unlike most other payment or income protection products. Their choice of cover, duration, exclusion periods and additional benefits determines the premium, allowing consumers to select what is best for them at a price they can afford.  This monthly policy provides cover up to £2,500 per month for between 3 and 24 months per claim. With excess periods of up to 180 days it can effectively bridge the gap between the consumers existing employment benefits and their lifestyle needs.

Chris U’Dell said “We have basically created a range of insurance products that we believe are fundamentally better than the prescriptive models we see in the market place. We have looked at what is available, looked at their limitations and improved on them. The commission structures within our programmes are excellent but they are not greedy, allowing us to provide the end consumer with real value for money. ”
Download press release

The credit crunch has meant that there are fewer cars, fewer houses, fewer loans and a consolidation of the market.  This is terrific because with a market shake-up it gives us the ability to go out there and do better things with better products and better people into markets that have been under served by those that have not invented and looked after their customers over the last few years.

We are certainly going out there to assist these companies that want to be in the financial service markets but unfortunately through FSA or through the market’s depression have seen that it is much more difficult for them.  What we are trying to do is speedboat in that industry and go out and show them that there is a better way.

Technology based solutions actually do do that.  Their inventiveness by having one policy that they would normally have five off. I give the example of our Lifestyle Protect; rather than having payment protection on your mortgage, your loans, your credit cards, your catalogue, why not just take out a Lifestyle Protect programme which is a lot more customer friendly in terms of price. What it does and gives them the choice of the levels of cover they are after that they need.  Whether it be life, accident, sickness, unemployment or all of the above or any combination.

So I think in looking at the credit crunch what it has done, in my opinion, is given the world an education into how banks work, and I think that has been very healthy. I am not sure that people in the industry even knew how banks worked !

Press Release: Business & Domestic Team Expands

Richard Amphlett has joined the team at Business & Domestic Insurance Services as Divisional Business and Client Manager. Richard was previously Head of Business Development at Hitachi Capital Insurance Europe and has worked extensively in Sales Leadership roles. Reporting to the MD, Richard will be responsible for delivering new business within the Retail and Financial Services sectors.

Chris U’Dell, MD said “Richard brings a wealth of knowledge, talent and personality to our group and I am delighted to welcome him on board”.
Download press release

Despite Gordon Brown’s recent efforts to kick start the economy the headlines in this weekends edition of FT Weekend read “Brokers warn of further rises in mortgage rate“.

According to the FT brokers expect the two year fixed rates to increase in the coming weeks and that consumers will not benefit for at least 3 months. The biggest evidence of this is HBOS move to withdraw most of their mortgage range and “immediately repriced some rates 60 basis points higher”

With the cost of borrowing already much higher than this time last year, I have no doubt this will put increased pressure on many customers. If Mr Brown’s £50 billion injection does not have an impact then the writing on the wall is clear. Increasing difficulty in obtaining a mortage, increasing difficulty in making the repayments leading to increasing volume of repossessions.

Of course the situation will not be improved by last weeks High Court ruling that bank charges can be review by the Office of Fair trading. The FT reported that some consumer groups have argued that banks may have to repay around £10bn of fees which they have charged to their customers over the previous 6 years. A figure that will not encourage them to reduce their cost of lending!

http://www.ft.com