The industry waits with bated breath for OFT’s decision

Tomorrow is the deadline for the payment protection industry (PPI) to make a last ditch attempt at getting the Office of Fair Trading (OFT) to abort a planned referral to the Competition Commission (CC).

The PPI industry is very lucrative for Britain’s blue chip companies such as Royal Bank of Scotland, Lloyds TSB, Aviva and HBO and a clampdown will seriously affect their profits.
Figures published in The Times newspaper* showed that there are 6.5-7.5 million new policies sold each year with annual premiums paid of £5.5 billion. For every £1 collected, 15-20 pence is paid out in claims, leaving a huge chunk of change for the PPI provider.

The figures also show that anyone who takes out PPI on a loan will pay between 13-56% of the value of the loan in PPI premiums.

Simon Burgess from independent PPI provider BritishInsurance.com says that consumers are being ripped off by greedy, unscrupulous lenders who provide often unsuitable, overpriced PPI policies. He welcomes a full investigation into the industry saying:

“For too long now consumers have been sold policies that are often not suitable for their needs. The terms of the policies aren’t always fully explained and many people are pressurised into buying an over priced policy that they do not really understand.

“This shake up in the market will identify those companies which are failing their customers and will hopefully bring about fairer pricing and improved sales processes.”

Should the Competition Commission investigate the market, a crackdown could include:
• applying a delay to the sale of PPI by lenders. This would give borrowers a chance to shop around elsewhere
• Warnings on product literature such as “PPI is not compulsory” together with comparison charts of pricings
• Tougher punishments on salespeople found guilty of mis-selling

It is interesting times for the PPI sector and no doubt there are a lot of people holding their breath to see what decision the OFT will make tomorrow.