Following a review of the PPI market, the OFT admitted its concerns over features of the market that prevent, restrict or distort competition and called on the Competition Commission to undertake a further investigation into the sector.
The OFT study highlighted that consumers were dissuaded from shopping around for the best deals because of the huge point-of-sale advantage by distributors. It also admitted concerns over the complex structure of PPI policies and that consumers were receiving poor value from PPI.
Announcing the decision, OFT chief executive, John Fingleton, said: “Following the work we have undertaken it is clear that many consumers are failed by PPI – insurance which gives them a poor deal and often less protection than they think. There is limited evidence the industry is taking steps to improve the situation, but we believe they will not make major improvements to competition in the market. Given our evidence and the scale of this market, our view is that it would be appropriate for the Competition Commission to investigate further.”
Clive Briault managing director of retail markets at the FSA, added: “When sold properly PPI can provide valuable protection against changes in personal circumstances. But despite some improvements in standards, major weaknesses remain which go to the heart of the culture surrounding PPI sales.”
Michael Coogan, director-general at the Council of Mortgage Lenders (CML), expressed his surprise the investigation would include mortgage payment protection insurance (MPPI). He said: “It’s surprising that the OFT has included prime MPPI in its referral, given that its study pointed out differences in terms of greater access to standalone cover than in other PPI sectors.”
Graham Boulger, group commercial director at Paymentshield, added: “We’re dis-
appointed that the PPI investigation has failed to pick up the way that the vast majority of brokers work in selling MPPI, and makes no distinction between the way single premium PPI is sold on loans and the way MPPI is advised and sold on mortgages.”
Shane Craig, managing director at Paymentcare.co.uk, gave a cautious welcome to the announcement. He said: “It is good news that the PPI market is being referred to the Competition Commission. The only downside is that the review could take a further two years, during which time consumers will continue to be disadvantaged.”
