Press Release

FLA QUESTIONS OFT’s PPI CONCLUSIONS

30 November 2006

The Finance & Leasing Association (FLA) has today responded to the conclusions and recommendations of the Office of Fair Trading’s (OFT’s) Market Study into payment protection insurance (PPI).

We are  disappointed that the OFT made its recommendation to refer the market to the Competition Commission with only a cursory examination of some of the findings of their own research and that of the FSA’s thematic reviews into PPI.

From FLA’s perspective, the OFT has made little effort to engage either with the PPI supply chain or with Trade Associations. In the light of the changes already made, and the changes anticipated by the FSA thematic reviews, for the OFT not to acknowledge the willingness of PPI providers to undertake the reforms needed discredits both its conclusions and recommendations

Lack of knowledge about PPI is cited as a failing of the market. However, the OFT has not investigated whether the knowledge is comparable to that about other insurance markets. In addition, it gives undue emphasis to some research conclusions apparently to suit its own preconceptions: this is illustrated by chart 19 which considers why respondents did not take out PPI. Despite there being four reasons eliciting higher responses, the headline refers to the one person in ten who believes that PPI ‘is a con with too many loopholes’. High proportions of interviewees for the research who had taken out PPI in the last twelve months were satisfied with the sales process, and with the peace of mind that having PPI gave them. Whilst the PPI market is not perfect, changes are happening, and dissatisfied customers are in the minority.

FLA Director General, Martin Hall said:

“We are disappointed that a step so drastic as a Competition Commission referral was taken without any efforts at consultation with the industry about possible remedial steps, and even without any recommendations to the Commission about what steps or changes may be needed to solve the problems identified by the OFT. We expect joined- up government to be matched by joined- up consultation.

“The Competition Commission will need to work closely with the FSA, the regulatory body for insurance, to make sure that by the time it closes its investigation and makes its judgement, the necessary changes haven’t already been made and the problems ironed out by the response to the FSA’s Treating Customers Fairly and PPI Thematic Reviews.”