CPP comes under fire for insurance sales practices

Card Protection Plan (CPP) founder Hamish Macgregor Ogston and the management team responsible for the mis-selling scandal should “probably be banned for life” from selling insurance, a leading regulation and compliance consultant has told Insurance Times.

Branko principal Branko Bjelobaba’s comments came after the FSA fined CPP £10.5m and the latter has agreed to pay compensation to customers for the mis-selling of credit card protection insurance.

The fine is the largest consumer retail mis-selling fine and comes in the wake of the personal protection insurance (PPI) mis-selling scandal of 2011.

Bjelobaba said that certain people in the insurance industry were “ripping off” consumers by charging them for products they didn’t want or need.

“Even if you are selling low-cost insurance at £10, £15, £20 you have got to establish a need for that product,” he said. “You can’t force it down people’s throats, they must want to have the product.”

Bjelobaba said insurance brokers regularly added on products that delivered large margins and claimed the motor insurance industry was typical of the type of sharp practice that often occurred.

“There are people who don’t even know that they have some products added on,” he said. “The classic example is motor insurance where there are loads of additional elements to a policy, like breakdown cover or legal cover, that could be costing the policy holder £15 or £20 or more that they never wanted and have never made a claim on.

“I’ve spoken to insurance brokers and asked what the claim rate is on certain policies and they’re told me it is about 5%. A lot of things are included on bank accounts as well.”

Bjelobaba said the new Financial Conduct Authority (FCA), the successor to the FSA, would have the power to stop CPP from making sales of any products it deemed to be “dangerous” immediately but proving such a case against CPP would have been difficult. “It is a question of whether the product it actually dangerous or whether this is a simple case of mis-selling,” he added.

But he suggested it was hard to see CPP being the last firm to face regulatory action given “the number of very clever people out there that make serious money ripping people off”.

“Whether those people should be authorised to run an insurance company once people have had their fingers burned? Probably not, they should probably be banned for life,” he said.

CPP was not immediately available for comment.