The PPI (payment protection insurance) market has recently come under severe criticism for pricing, transparency and competition issues from the FSA and the Consumer Association, with a forthcoming Office of Fair Trading investigation into the market on the horizon.
Details of the deadline have been circulated to members of the Council of Mortgage Lenders (CML) Executive Committee in a restricted Memorandum. The document says the FSA met with the relevant trade bodies on 19 December 2005 and then in a subsequent letter sets out key messages for the industry to take on board, which read as follows:
The FSA wishes to see improvements to what it deems market failure issues related to ICOB compliance, transparency and product choice.
The trade bodies have until 17 March to introduce concrete self-correcting voluntary measures to address these issues.
Otherwise the FSA will impose its own corrective actions. These could include measures to separate the sale of insurance from core products; or at least better clarify sales processes.
Commenting on the news, Simon Burgess managing director of britishinsurance.com said: “This comes as no surprise and having warned the market and seen little in the way of improvement, the regulator is at last bearing its teeth. Hopefully the PPI market can avoid being nannied further by the regulator and sort itself out.
“However, there have been countless examples in the past where financial markets have not been mature enough to deal with their problems and have found themselves facing outside intervention and regulation.”
Work has been ongoing to improve standards in the MPPI (mortgage payment protection insurance) market and to date it has avoided much of the criticism levelled at other areas of the payment protection market. The CML and the Association of British Insurers (ABI) are currently undergoing a review of the baseline specifications in place for policies, although the CML said there was no appetite to do likewise in other payment protection areas.
It said: “There appears little or no appetite by either the British Bankers’ Association or the Finance and Leasing Association to create a product baseline specification akin to what the CML has done for MPPI".
In the memorandum the CML also expressed its concern that the PPI market would be unable to recommend or implement changes that would go far enough to placate the FSA and avoid its intervention come the March deadline.
