The Office of Fair Trading's (OFT) investigation into the £5.4bn payment protection insurance (PPI) industry could radically transform the way in which key PPI players do business.
Banks, credit card companies and insurers will need to be prepared for intense scrutiny of their PPI businesses.
David Strang, a competition partner at City law firm Barlow Lyde & Gilbert, said: "It would be complacent for insurers to assume that this will be an inquiry which will just fizzle out.
"The latest decision by the OFT to challenge credit card default changes shows how seriously the OFT pursues this type of issue. The OFT could impose significant changes to the way in which PPI is structured and sold.”
Strang added: “The OFT may well deem certain current practices unlawful, which would require considerable re-writing of policy terms. At the very least, greater clarity and openness will be required.
"While some providers of PPI may wish to await the outcome of the OFT's inquiries, others will wish to consider now how their policies might need to change and the impact that would have on the profitability of this line of business."
