Payment protection insurance

The Financial Services Authority's (FSA) second phase report on payment protection insurance (PPI) has been published.

 

It did not include prime mortgage payment protection insurance (MPPI), as the FSA uncovered few compliance failures in this sector during the first phase of its investigation.

 

The Office of Fair Trading has nevertheless decided to include MPPI in its proposed referral to the Competition Commission, which also been announced.

 

 

Stakeholder Response: Council of Mortgage Lenders

 

 

Michael Coogan, CML director general, said: "It is surprising that the OFT has decided to include prime MPPI in its proposed referral to the Competition Commission, given that its market study points out differences in terms of greater access to stand-alone cover than in other PPI sectors. 

 

"However, we will naturally examine the OFT's reasoning in more detail before responding formally.

 

"The work we have done on prime mortgage payment protection insurance clearly demonstrates that it is possible to create a credible product with a compliant sales process. 

 

"We hope that mortgage borrowers who need MPPI are not put off taking it because of more general concerns about the wider PPI sector."

 

 

Stakeholder Response: Association of British Insurers

 

 

Stephen Haddrill, ABI director general, said: "The FSA recognises the value of payment protection insurance for many customers, and welcomes steps the industry is taking to improve selling practices and transparency.

 

"For example, in a voluntary initiative earlier this year, ABI member companies agreed to refund an appropriate proportion of premiums when loans are settled early or the policy is cancelled."

 

 

Stakeholder Response: Finance and Leasing Association

 

 

Martin Hall, director general of the FLA, said:

"We agree with the FSA that PPI is an inherently sound and helpful product, which provides many people taking out loans with valuable protection.

 

"However, both the product and the sales process must achieve higher standards. We are therefore committed to work with others to ensure greater consistency of approach, openness and understanding."

 

"Prompt cross-industry action in response to FSA’s findings is preferable to more regulation. This does however require the commitment and involvement of all concerned.

 

"Compliance with FSA sales rules is essential and consumers need to be able to understand clearly the cost, scope and limitations of policies for their particular circumstances."