The Financial Services Authority is investigating the payment protection insurance selling practices of 10 firms with a view to taking enforcement action.
Speaking at a Treasury Select Committee hearing on the FSA’s annual report, Callum McCarthy, chairman of the regulatory body, says: “We are investigating 10 firms with a possible view to taking enforcement action on their PPI selling practices.”
He says the regulator will take action on firms selling PPI where there is significant evidence of mis-selling, taking into account the FSA's treating customers fairly (Tcf) principle.
Rather than forcing firms to disclose their commission levels when selling PPI, McCarthy says the FSA is more concerned consumers recognise the importance of checking the terms and exclusions of policies.
John Tiner, chief executive of the FSA, admits the commissions on PPI are higher than any other type of policy – with some as much as 66% of premiums – but says disclosure of premiums is not the right way forward.
He states: “I’m not sure commission disclosure is right because I don’t think consumers know what to do with this information. We need competition in the market to bring costs down.”
Tiner says the FSA will consider putting information on its website to enable consumers to compare different firms’ commissions and will feed back to the Treasury Select Committee in a month.
McCarthy adds the distribution model in general is “unattractive” and says if firms do not change they will face competition from new entrants in the market.
He states: “There is a recognition that churning is unattractive and I hope this will pressurise the industry to change.”
Although more consumers are paying a fee for advice, the FSA’s mystery shopping has revealed not enough advisers are making it clear to consumers they offer a fee option.
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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