ABI warns Competition Commission proposals could destroy the market.
The Competition Commission has proposed banning the sale of payment protection insurance alongside loans in its provisional report on the PPI market.
Following an inquiry into the sector, the Commission found that lack of competition in the market meant that consumers were being overcharged by over £1.4bn a year.
The report said that the vast majority of the more than 14m policies sold each year in the UK were sold at the same time as consumers took out a loan or other type of credit. The led to a lack of competitive pressure amongst providers and higher charges.
The Competition Commission is proposing a number of potential measures aimed at increasing competition. These include providing better information to customers about PPI to enable them to compare products and switch between providers.
It is also considering banning the sale of PPI at the same time as the sale of credit product to end the ‘point of sale’ advantage held by distributors.
Inquiry chairman and Competition Commission deputy chairman Peter Davis said: “We’ve found serious problems with the PPI market and customers are paying for the lack of competition.”
But the ABI warned that the proposals could damage the PPI market. Nick Starling, the ABI’s director of general insurance and health, said: “We acknowledge that there have been problems in the PPI market and we have done a lot to change that; these changes now need time to bed in.
“We are very concerned that the Competition Commission’s proposed remedies could destroy this market, particularly while we are facing a period of economic uncertainty. It would be disastrous to leave many people unprotected to deal with unforeseen financial crisis.
The ABI said it supported measures to make PPI more accessible and transparent for customers, including making more information available to consumers so that they can make an informed decision when buying a PPI policy.
Over the last two years the insurance industry had made changes to PPI as a product; the market is changing and therefore should not be judged retrospectively, the ABI said.
