Competition Commission Initiate Changes In Retail Payment Protection Insurance Sales
Monday 24 November 2008
Over the last three days the Competition Commission (CC) has published its new guidelines in relation to payment protection insurance (PPI).
The guidelines are not in relation to PPI as a whole but are concentrated towards retail PPI; protection that is procured in relation to home-shopping-catalogues.
The findings of the CC in relation were published last month and it is now that they have used their power to unleash their changes.
The report unveiled that the amount that distributors were charging for policies was rapacious and profligate. The amount of money being made from each policy, obscene and absurd. It is all due to somewhat of a monopoly within the market and the little competition that is out there is not really given a chance as the distributors pretty much force-feed the policies to purchasers alongside their purchases. The CC has published a list of remedies that they expect to see implemented.
The CC have met with providers and any parties that are associated in order to propose a package of initiatives in order to put an end to the egregious phenomenon that is the selling of retail PPI. It is hoped that more competition will reduce the overpricing of policies.
The suggested remedies tie in closely with those that have been introduced to the sale of PPI as a whole. There are two nuances though. It has been mooted that PPI be offered in a separate capacity to merchandise cover. There has been no need to implement a ban on single-premium policies as retail PPI is charged monthly anyway.
Implemented measures includes:
1. obligatory separation of PPI and merchandise cover.
2. the prohibition of PPI sale by way of a 14 day cooling off period between items being purchased and PPI being offered. The important thing here is that the point of sale advantage is being removed and consumers are being given the opportunity to shop around for cover. In the case of the consumer they can contact the retailer subsequent to a 24 hour period if they want to procure PPI through them.
3. a demand that retailers give a PPI quote that is clearly separate from any other costs so that the consumer is entirely aware of how much the policy costs. The problem in the past has been PPI being added to the cost of purchasing without the consumer being made aware.
4. the enforcement of retailers being made to specify the terms and conditions of their PPI products within adverts, as well as costs. This will create transparency within the market and consumers will be completely aware of what they are purchasing.
5.demanding that the rubrics of policies are detailed to the Financial Services Authority (FSA) and the Office of Fair Trading (OFT) so that the powers that be are completely aware of what is being sold to customers and the nature in which it is being sold.
6. retailers will be made to supply a monthly or annual statement to customers in relation to PPI. This allows customers to be aware of what they are getting and affords them the sensation of having something tangible for their money, even if it is just an envelope with some paper inside. It will also remind customers to annually evaluate their cover and revise it where necessary.