The Office of Fair Trading (OFT) has launched a market study to look in depth at the payment protection insurance (PPI) sector following a super-complaint from Citizens Advice.
The OFT response to the super-complaint, published in December 2005, identified issues which pointed to the sector not working well for consumers and indicated the need for a more detailed examination.
The issues were:
- Consumers face difficulties in getting information they need about alternative suppliers and the information available is often too technical to be understood easily;
- There are high costs or other barriers to entry for standalone PPI providers;
- There is a wide degree of variation in pricing in the sector; and
- Gross profit margins appear high – PPI ratios are low compared to other general insurance products.
The market study will examine these issues in more detail and will also look at:
- The relationship between the various players who supply PPI – lenders, insurers and intermediaries – and how this affects the sector;
- How the product is sold to consumers and what influences their choices;
- Consumers’ experiences of making claims;
- The impact exclusions have upon consumers’ ability to shop around; and
- Consumer awareness and understanding of exclusions.
The OFT says the market study will give it the opportunity to look more carefully at the Financial Services Authority’s (FSA) thematic work on PPI and the Competition Commission’s work on store card PPI, and assess the impact of their work on the sector.
A business survey will be sent out shortly to lenders, insurers and intermediaries, and a detailed survey of consumers will also be carried out.
The OFT expects to publish its report at the end of 2006.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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