Proposals come as ABI prepares to launch study
The controversial £5bn-a-year payment protection insurance (PPI) industry came under heavy fire this week, with government proposals that could decimate the industry and scathing criticism from a respected consumer watchdog.
But the ABI plans to hit back in defence of the product.
The Ministry of Justice (MoJ) last week outlined proposals to shake up personal insolvency legislation by granting consumers a 12-month amnesty on debt repayments if they fall into financial difficulties such as job loss or illness.
The proposal could have a devastating effect on PPI sold alongside personal loans and credit cards by banks and writers. The policies are underwritten by major UK insurers.
A spokesman for the ABI said it was still too early to say what will happen but the proposals to the consultation, which closes in the April, will be analysed carefully.
He said: “This is definitely something we have an interest in and we will be contributing to the consultation process.”
A spokesman for Norwich Union, one of the main providers of PPI, said it was too early to comment.
In a further blow to the industry, consumer watchdog Which? claimed that insurance products, such as PPI, were an expensive waste of money.
The battle is set to continue with the ABI preparing to publish a survey that will suggest single women are most in need of PPI, because they tend to have less money in savings.
The survey will also say that the key barriers to PPI are lack of affordability, a lack of confidence in the product, and lack of knowing where to go to receive unbiased advice.
The ABI appointed consultants NMG to carry out 2,000 interviews with members of the general public. The aim of the interviews was to determine how PPI products can help people with financial expenses, and gauge consumer opinion.
A source close to the current consultation welcomed the findings of the survey, adding: “It’s very important given the current climate of trust over PPI. It’s going to become a real battle. It’s become ingrained in the public’s opinion that PPI is evil. Changing this perception will be down to some of the large banks, as they control most of the market.”
FSA fine for HFC over use of PPI
Earlier this week, the FSA fined HFC Bank over Â£1m for failures relating to the sale of PPI. In a statement, the FSA said: â€œHFC put its customers at an unacceptable risk of being sold PPI when it was not suitable for them.â€
HFCâ€™s 136 branches sell PPI in connection with both secured and unsecured loans. Between January 2005 and May 2007 HFC sold PPI with 75% of the loans it provided, totalling 163,000 PPI policies â€“ even though HFC's customers largely had poor credit ratings.