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Daily Insurance Industry News
Tuesday 21st of August 2018
November 13, 2008

Competition Commission gets tough on PPI sales

by Gill Montia

Story link: Competition Commission gets tough on PPI sales

The Competition Commission is proposing a ban on the sale of Payment Protection Insurance (PPI) within 14 days of the sale of an associated loan or credit card facility.

The Commission has been investigating the sale of the insurance amid claims by consumer groups and others that it is often expensive and has been habitually mis-sold, with some customers given the impression that they will not secure a loan unless they take out PPI with the loan provider.

In many instances providers incorporate the cost of a one-off PPI premium into a loan, so that the customer pays interest on the premium.

The Commission also wants this practice banned and for consumers to be given time to investigate appropriate PPI cover for their needs.

The British Bankers’ Association (BBA) and the Association of British Insurers (ABI) are wholly opposed to the proposals as they stand.

The BBA believes they could encourage people to borrow without the security of PPI and the ABI believes the measures under consideration could kill the PPI market altogether.

Earlier this year, the Competition Commission published a preliminary report on PPI in which it claimed that customers were being overcharged by an average £100 a year.

High Street Banks are known to make large profits from selling PPI alongside personal loans and according to the Commission, earnings from PPI have been used to prop up unprofitable lending.

In a working paper published in January, the Commission stated that the UK personal loans business had suffered from declining profits to the point where in 2006, it appeared to have been loss making before taking into account income from PPI.

Following a period of feedback on the proposals, the Commission will publish a final report and recommendations on the PPI market, early next year.

 

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