But trade bodies say seven-day rule will hurt consumers
Banks will have to wait seven days before they can sell customers payment protection insurance (PPI) under a Competition Commission crackdown.
Under the rules, which will come into force in 2010, banks will not be able to offer PPI at the point of sale, or provide single premium policies. Lenders have also been ordered to provide “improved information” to customers.
The news comes as Norwich Union raises its mortgage payment protection insurance premiums by 15% to 20% to reflect increased demand.
The Competition Commission’s report into the £3.8bn-a-year PPI industry, released last Thursday, again criticised firms for over-charging customers.
“These are significant measures carefully designed to address the serious competition problems that exist in this market,” said Peter Davis, the commission’s deputy chairman and chairman of the PPI inquiry.
“The point-of-sale advantage has meant leading providers have faced little competition for PPI and, as a result, have charged persistently high prices.”
Industry bodies said the move would hurt customers, however.
Nick Starling, director of general insurance and health at the ABI, said: “The ABI believes the point-of-sale ban carries significant risks for borrowers, mainly by leaving them unprotected at a time when unemployment cover has never been needed more.”
Robert Sinclair, director of the Association of Finance Brokers (AFB), said the decision “failed to recognise the benefits of this product designed for a particular segment of consumers”.
Meanwhile, Norwich Union said the economic downturn had led it to increase its premiums for mortgage PPI. A spokesman said: “We are seeing an increase in the number of claims. We are also looking ahead and economists agree that there will be an increase in unemployment. So we as a responsible insurer have to make the necessary changes to respond to the level of risk.”