The Financial Services Authority (FSA) has launched its “free and impartial” payment protection insurance (PPI) comparison tables.
The regulator hopes the new tables will help customers accurately compare the various providers’ deals in order to identify the cheapest cover that meets their needs.
PPI is a type of insurance that covers loan repayments should a person become ill or lose their job.
Lack of competition
The regulator has taken a special interest in the insurance following allegations that providers were repeatedly selling policies to customers who had no chance of making a claim.
Of particular concern to the FSA is the fact that the vast majority of PPI policies are being taken out at the point of sale – that is, the customer purchases the policy at the same time as they take out the loan, mortgage or credit card.
Not only does this completely erode the possibility of competition, as the customer does not get a chance to compare other offers, but it almost always works out significantly more expensive.
As a result, the FSA is keen to promote competition among providers and ensure customers take the time to shop around.
Improving PPI sales standards
“The FSA is committed to helping consumers make informed decisions about PPI and to shop around more effectively - the PPI tables are a key part of this,” says FSA financial capability director Chris Pond.
“PPI is almost always optional and consumers need to consider their own financial circumstances when deciding to purchase it and make sure they are clear about what will be covered.
“The PPI tables, which are updated daily, will feature single and regular premium policies. As well as giving information on the cost of PPI, the tables will provide details of exclusions and how pre-existing conditions are handled.
“This is the latest step in a longstanding programme of work the FSA has been carrying out to improve the standards of PPI sales,” says Pond.
FSA not the only one targeting PPI
The launch of these tables comes hot on the heels of a scathing report on PPI from the Competition Commission (CC). It found that sellers are overcharging customers to the tune of £1.4 billion every year, adding that there are “serious problems” within the PPI industry.
As a result, the Commission is considering imposing a wide array of measures on PPI sellers, including an outright ban on ‘point of sale’ PPI. “We’ve found serious problems with the PPI market and customers are paying for the lack of competition,” says CC deputy chairman Peter Davis.
“Distributors don’t appear to compete much with each other on either price or quality of PPI; neither do they appear to do much direct advertising of PPI to win customers from each other.”
