With the backing of the UK’s Competition Commission (CC),
proponents of reform of the country’s payment protection insurance
(PPI) market have scored a major victory.
Following a lengthy evaluation of the market which culminated in
the publication of a consultation paper in November 2008 (see
LII 230), the CC has announced sweeping changes to the PPI
market that will come into force in 2010.
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The most significant of these are:
• A ban on the sale of single premium PPI policies;
• Prohibition of the sale of PPI by a credit provider within
seven days of the sale of credit;
• Credit providers must give consumers a personal PPI quote
stating cost of insurance on its own and when added to the credit
product; and
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By GlobalData• Provision of an annual statement to PPI customers reminding
them that they can cancel the policy.
“This decision helps sound the death knell for PPI,” said Louise
Hanson, head of campaigns at consumer group Which?.
She continued: “For too long too many consumers have suffered
from shoddy, expensive and inadequate protection. It is a great
shame that since we began campaigning for better products, many
people have wasted millions of pounds on PPI.”
According to the CC’s findings, there were just over 4.34
million active single premium PPI policies sold by the 12 largest
distributors at the end of 2006.
Preempting the CC’s decision, five UK banks ceased selling
single premium PPI at the end of January – Alliance &
Leicester, Barclays, The Co-Operative Bank, Lloyds Banking Group
(Lloyds TSB, Halifax, and Bank of Scotland), and Royal Bank of
Scotland/Natwest.
Not all are impressed with the banks’ decision, among them
Anthony Sultan, a Claims Standards Council executive member and MD
of The Financial Claims Service, a company dealing with claims
against banks and lenders.
“It has taken the commission’s report into the sale of payment
protection insurance to force the banks into action – even if it
was days before being damned,” said Sultan.
“In reality, the Financial Services Authority should have been
applying pressure long time before the conclusion of this 23-month
investigation.”
