There has barely been a peep from either the regulator or the payment protection insurance (PPI) market, despite the brouhaha in the run up to the 17 March deadline. This was the date by which the PPI bodies had to submit concrete self-correcting measures to address the failings in the market after a year that has seen criticism heaped upon it from every angle.
The FSA’s review last year highlighted a number of problems concerning ICOB compliance, transparency and product choice. A super complaint lodged with the Office of Fair Trading (OFT) by Citizens’ Advice spotlighted competition problems in the market while the British Insurance Brokers’ Association (BIBA) called for the abolition of single premium policies.
As if this wasn’t sufficient, reports by Defaqto and Moneyfacts raised questions over the validity of policies sold to unsuitable individuals and the value for money they were receiving. Clearly it has not been a good year for PPI.
Effective and timely
This is why it’s so essential that something solid must come from the FSA deadline. Now that suggestions for improvement have been lodged, a meeting is set to take place in the coming weeks to go through the proposed changes and examine how best they might be put in place. Although it’s important to reach the most effective resolution, it’s also important this happens in a timely fashion.
There is every likelihood that one meeting will follow another before final drafts are created and a timetable for implementation is eventually agreed upon. This could take months and, in the meantime, the PPI market will continue to struggle with the poor press it has been receiving and the poor reputation it has fostered among its clients. Instead we should be looking to a quick turnaround on these matters, enabling the market to show that clients’ needs, value for money and transparency are the building blocks that we will concentrate on for the future.
Introducing standards
The main issues revolve around the sale of single premium policies, the complexity of some of the products in the market, poor client factfinds and sales processes, and a lack of transparency. Firms could resolve many of these problems by taking a firmer hand over their own operations and implementing better point-of-sales processes. There is no excuse for policies being sold to individuals who are not even eligible for the cover offered. This creates dissatisfaction for clients when they come to make a claim, and gives the industry a reputation for not paying out on claims. If clients don’t think the insurance will help them in their time of need, they certainly aren’t going to buy it.
Whether the industry looks to introduce a best practice guideline or have standards that all firms need to meet remains to be seen, but certainly the basics of the point-of-sale contact with clients have to be improved.
Comparing policies in the PPI market has always been difficult as many have sought to differentiate themselves on the cover offered or the exclusions in place. If products were more standardised, they could be better compared at a basic level. This doesn’t mean products have to be ‘dumbed down’ – only that they could be made comparable at a benchmark level and, if extra cover and features were needed, they could be introduced over and above that. This would help eradicate the extremes of poor practice and value in the market and engender more competition.
Some have called for comparative product tables to be displayed on the FSA’s website, helping to show clients what is available from where and at what price. The more we can open up the market and not leave clients believing the only products available are those offered by their mortgage or loan provider then the better it will be.
Just because PPI has not had a great year doesn’t mean many of its products are not excellent or there is a diminishing need for what it offers. The very opposite is true. However, the longer the industry and the FSA take to decide on and implement the changes that will help drive the market forward, the longer clients will feel they are being disadvantaged by the problems that do exist in certain corners of the market.
There is a real opportunity for the PPI market to show itself capable and set its focus on products that really meet the needs of their clients at prices that offer excellent value. As soon as it agrees the way forward with the regulator, then we can all begin to make the changes necessary, publicise them to our clients and begin to shake off the poor reputation we have gained.
Simon Burgess is managing director of Britishinsurance.com
