The days of high PPI premiums are numbered - but for Simon Burgess a clampdown can't come soon enough

UK consumers are over spending up to £1bn a year on payment protection insurance (PPI) policies because poor competition in the market is keeping premiums unjustifiably high. This damning verdict is not mine, but that of the Office of Fair Trading (OFT).

The news comes on the back of an investigation carried out by the OFT, prompted by a super complaint made against the market last year by Citizens' Advice. A raft of problems were highlighted and in releasing its official findings, the OFT was less than complimentary about the state of the market.

Indeed, the OFT deemed the situation within the PPI market to be so serious that it has expressed its intention to refer the market to the Competition Commission for further investigation.

To many this will come as little surprise given the long running list of criticisms that have been filed over the last year. What is perhaps more surprising is the amount of time it is taking for changes to be put in place to ensure the worst of the problems are eradicated and consumers begin to get a better deal.

The PPI market is substantial. There are around 20 million policies currently in place. The work by the OFT found that between 6.5 million and 7.5 million PPI policies are sold each year, generating £5.5bn in gross written premium for providers.

Given the concerns raised by the OFT, it is likely the Competition Commission will come to similar conclusions once it carries out its own investigation. This will take time and there has been no statement from the Competition Commission as to when work might start.

Certainly the high street banks and providers will be watching nervously; they are loath to lose the point of sale prominence they enjoy in this market and have been pushing so hard to their own advantage. But if consumers are to receive anything like a fair deal, then the Competition Commission must be bold in the recommendations it makes and not be afraid to engineer a market that offers independent and online PPI sellers and distributors a levelling playing field.

It is not only the OFT that has cast aspersions on PPI sellers. The Financial Services Authority (FSA) has also spoken out over continuing failings in the market. Following a second thematic review of the market, the FSA said it again found firms failing to treat their customers fairly. The FSA went on to say that if extra rules were needed to ensure the market operated more effectively it would take until the fourth quarter of next year before anything could come into effect.

Given the number of policyholders and the premiums involved, this is simply not quick enough. Millions look set to lose out in the coming months because although the problems are there for all to see, nothing has been done to eradicate them where they exist. Any change takes time but action needs to come sooner rather than later before others are caught out.

Simon Burgess is managing director of