The CC's Final Report (the Report) was published on 29 January 2009 and sets out the measures it feels are necessary to enhance the competitiveness of the PPI market.
Why was there a lack of competition?
Following investigations, the CC found that the vast majority of PPI policies are sold at the same time as a consumer takes out some form of credit, consequently leading providers faced little competition and were able to charge higher prices for PPI at the point of sale than their competitors. Many customers were unaware that they could purchase PPI from other providers, and those that did, rarely shopped around for better prices or switched provider.
The measures being introduced
- A prohibition on the sale of PPI by a credit provider to the same customer within 7 days of selling a credit product to that customer. This gives the customer some breathing space and the chance to shop around. Customers can contact the provider themselves to purchase PPI, but only after 24 hours has passed since the sale of the credit product.
- Distributors must state the price of the PPI separately from the cost of the credit product (known as a 'personal PPI quote').
- A prohibition on selling single-premium PPI policies. These policies have rebate terms that act as a barrier to customers switching policy. Also, it is difficult to compare the price of these policies with other PPI policies. If premium is charged annually, or the policy is terminated the policyholder must secure a pro-rata rebate and no charges can be made for setting up of the policy or its early termination.
- Providers must set out certain information in marketing materials – e.g. price of the policy, that the policy is optional and that it is available from other providers. • All providers must send an annual statement to all PPI customers containing similar information to that provided in the personal PPI quote. The annual reminder of the cost of the policy and of the ability to switch should encourage customers to review their policy annually.
- Where distributors offer PPI as part of a package including PPI and merchandise cover, they must offer PPI on their own.
The CC feels that by introducing these new measures, which it hopes will come into force during 2010, it will eliminate the point-of-sale advantage creating a more competitive market which will ultimately benefit the customer by forcing a reduction in prices.