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.