There was a Provisional Findings report of a market investigation in to payment protection insurance by the competition commission published on the 5th June of 2008, which although overdue, resulted in some great changes to our PPI sales system in the UK. There are now less and less opportunities or poor operating procedures, which cause the mis-selling of PPI despite the fact that there are more and more claims being processed. This sounds unrealistic, but the increase in claims can only be put down to the increased awareness of the public about what constitutes a mis-sold policy.
PPI and Point of Sale
The Competition Commission (CC) found that there was a considerable lack of competition or a fair playing field for competitors at the point of sale. This meant that many customers who were purchasing with a finance agreement were only offered one option to protect their payments from loss of earnings through ill health or loss of employment. Things have changed considerably thanks to this initial report in to the point of sale situation and although some of the moves were opposed by the banking industry, there have been some positive steps. New regulations have been enforced by the FSA since the 6th of April 2011, which state that PPI can only be sold to a customer who signs a credit agreement seven days after their purchase of the said agreement. This allows customers reasonable time to shop around for suitable payment protection. After a seven day wait, the agent who arranged the credit can contact the customer to offer PPI.
Is it a Good Idea?
Of course, the answer to this has to be yes. People who want to protect their ability to obtain credit should have suitable payment protection cover, unless they can predict the future. One of the new regulations that took effect last April, states that customers are now to be shown statistics that demonstrate how many other customers have successfully used their PPI. This can help people decide whether a policy is likely to be useful for them or not. This also takes away the suspicion that many people have about the real value of having payment protection insurance.
Competing on Price No Longer an Issue
Section 4.2 of the CCs report states that there is little change in the cost of PPI over a period of cover and they could find little evidence that distributers were attempting to compete on price. Now that the point-of-sale PPI offers are eradicated, more players in the market compete on price as well as service.
A Distinct Lack of Quality Competition
It was not just the price that was highlighted, but the lack of competition based on quality of product or service was also obvious to the commission. This was found because the issue of quality was something that it would be almost impossible for a consumer to check on. There was no data available for customers who wanted to know if the policy provider competed well compared to other offers available. With the statistics on show and easily comparable for everyone to see, there are now policies that are much more effective. Quality of service is something many people would pay extra for if they could guarantee they were getting a better deal. Showing the number of customers who are successful in using their policy is the ultimate gauging system for people who could potentially lose their income.
If you have had a bad experience or you think you have been mis-sold PPI, make a PPI claim online straight away.