Insurance industry initiatives to improve the selling of payment protection insurance (PPI) could fend off the Competition Commission's investigation, the ABI has said.
The commission launched an investigation this week into the £5.5bn PPI market following a referral by the Office of Fair Trading (OFT).
The investigation comes amid concerns that consumers are not getting the best deal from PPI providers.
It could see the imposition of restrictions on the sector to improve competition.
Nick Starling, director of general insurance at the ABI, said initiatives were underway to improve the service to customers, which the commission could take account of.
"ABI members are committed to providing appropriate refunds and we are also working to improve claims handling and product information.
"We will continue this work while the Competition Commission carries out its investigations," said Starling.
He added: "The OFT found in its first report that there is effective competition between insurers to provide PPI, and the FSA has said on many occasions that it provides valuable protection, when properly sold, to many people."
John Fingleton, OFT chief executive, said: "Despite some evidence of a degree of consumer satisfaction with aspects of the product, the evidence as a whole suggests consumers get a poor deal.
"This referral will enable the Competition Commis-sion to undertake a thorough investigation of the market and, if necessary, ensure the appropriate remedies are put in place."
A spokesman for the commission said the investigation was likely to last about 18 months, and that it must be completed within two years.
The FSA has been taking steps to improve sales practices for PPI.
It recently fined GE Capital Bank £610,000 for failing to have adequate systems and controls for selling insurance which included PPI, and for failing to treat its customers fairly.