The All Party Parliamentary Group on Insurance and Financial Services has called for clearer rules on the non-advised selling of Payment Protection Insurance (PPI) and is considering submitting comments to the Office of Fair Trading (OFT).
In a briefing today John Greenway MP, chairman of the group, said non-advice firms need clearer rules on the selling of PPI because they are still authorised despite not giving advice.
Greenway suggested the group submits comments to the OFT before its market study closes at the end of the year.
His comments followed a briefing by Tom Baigrie, managing director of LifeSearch, who warns there has been a major increase in the number of non-advised PPI sales, which has resulted in many consumers buying inappropriate products.
Moreover, by not going through an IFA those consumers have lost an avenue of complaint to the Financial Ombudsman Service (Fos).
Baigrie believes a clear message needs to be sent out to consumers and to the Financial Services Authority (FSA), which is about to start its own review of the current general insurance regulations, stressing there is nothing inherently wrong with PPI as a product as long as it is appropriately sold.
He states: “It is the non-advised nature of PPI sales that is causing consumer detriment because they are persuading people to buy cover they do not need and by extension are causing people not to spend their budget on the covers that will protect them.”
He believes it is critical the product takes into consideration the personal circumstances of the consumer and it must be sold to someone who can actually claim on it to avoid financial hardship.
Further, consumers need to know what rights they might be giving up by buying PPI products without advice.
Baigrie says: “While every responsible consumer should have the right to choose whether or not they want to take financial advice, equally every responsible seller should have a clear duty to inform consumers of what impact a non-advised sale will have on their right to complain in the event that the product turns out to be inappropriate for their needs.”
Although the FSA website makes it clear consumers will have less ground for complaints if they buy without advice, Baigrie points out very few are likely to look at the site during the sales process.
He argues the non-advice sector is very poorly regulated and says this is made worse by the fact PPI is the most profitable of all protection products for the seller.
“The industry presents the most profitable and simple to buy products, not those that actually best address the consumer’s needs,” adds Baigrie.
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From 6 April 2019