Payment Protection Insurance to be more competitive

In a report released today, the Competition Commission launched a scathing attack on the way that Payment Protection Insurance is sold in the UK. According to the report, it appears that customers are being overcharged to the tune of £1.4 billion a year. The findings of the report show that the vast majority of the UKs more than 14 million PPI policies are sold at the same time as a consumer takes out a loan or other type of credit. Many consumers are unaware that they can buy PPI from other providers and therefore don't shop around. This makes it difficult for other providers to reach these customers and in the absence of such competitive pressure, the distributors such as banks, mortgage lenders and credit card providers are able to charge higher prices.

Some of the measures being considered to increase competition include a possible ban on single premium policies, a ban on selling the policy at the same time as the credit agreement it protects, or a cap on premiums.

Inquiry Chairman and CC Deputy Chairman, Peter Davis, said,

"Weve found serious problems with the PPI market and customers are paying for the lack of competition. The way PPI is sold as an add-on to a loan or other credit product means distributors escape the pressure they should face from competing suppliers. Distributors dont appear to compete much with each other on either price or quality of PPI; neither do they appear to do much direct advertising of PPI to win customers from each other."

Commenting on the news, Tim Lee, Managing Director of The Mortgage Warehouse said,

"This is very good news for consumers. Payment Protection Insurance, including Mortgage Payment Protection Insurance is one of those products for which there is a huge need, especially in the current market. Unfortunately, it is a product which has been extensively miss-sold in the past. In particular single premium policies have always been wide open to abuse, and we took the decision nearly a decade ago that we would not offer them. Even monthly premium policies can vary wildly in price, and it is not uncommon for mortgage brokers to be offering policies at two thirds of the price charged by some lenders for the same level of cover"

He went on to add,

"The fact that consumers are not aware of their ability to shop around calls into question the effectiveness of the current disclosure regime, and suggests that Initial Disclosure Documents are not being fully understood by consumers".

Related Articles

Discount Life Insurance Quote System LaunchedUK financial Solutions Switches to British Insurance For Mortgage Protection ABI worried by consumers who fail to protectImportance of mortgage payment protection insurance highlighted