Is Time Up For PPI?

The provisional verdict is in and it’s not looking good for payment protection insurance (PPI). Whether you take the view of the Office of Fair Trading (OFT) or the Financial Services Authority (FSA) consumers are getting a raw deal. They’re just not getting the right information and they’re being told things that just aren’t true to get them to sign on the dotted line.

The FSA’s review, conducted among 40 firms and over many months, has found that firms aren’t giving customers clear information when they’re selling the policy. Most customers don’t know that PPI is optional and they don’t even know how much it will cost.

Claiming is another area of concern, especially with some firms failing to recommend policies that are suitable for customers’ needs. Some people already have those benefits through other policies, but if sales people don’t find that out, customers end up paying for something they just don’t need.

The FSA also slated the sale of single premium policies, with the suggestion that sale people bend customers towards these when regular premium policies are available.

But these weren’t the only knocks for PPI. The OFT is kicking the industry upstairs, with a provisional decision to have the Competition Commission take a look. That could spell the end to big provider profits, as very few successful PPI claims are made. Seven million policies a year and a market worth £5.5 billion adds up to money in the pocket for PPI providers, but consumers are not given the information they need to compare policies, say the OFT. Some consumers have even been told that getting a PPI policy will help their application for credit.

Reaction from the consumer oriented and financial organisations has ranged from ‘we told you so’ ( from Which? ) to ‘what, you mean mortgages are included, too? (from the Council for Mortgage Lenders). Many of the financial comparison sites have welcomed the news but have said that it will be a long time before the benefits of these findings filter down to consumers. In the meantime, consumers have been advised that they don’t have to take out PPI and that standalone policies might be better.