The Competition Commission (CC) is consulting on changes to the way retail payment protection insurance (retail PPI) is sold.
The CC has outlined changes in a document today that will see clearer information provided to customers on the cost of retail PPI cover and their rights ‘unbundling’ PPI from merchandise cover and a requirement for providers to supply information to the new Consumer Financial Education Body (CFEB) for its price comparison tables.
Retail PPI is a small part of the overall PPI market relating to protection taken out on repayments for shopping through home catalogues, typically accounting for about 2.5% of PPI gross written premium paid by customers.
In May 2010, the CC provisionally decided that consumers would benefit from the introduction of a point-of-sale prohibition for all other forms of PPI, but provisionally decided to consider excluding retail PPI from this requirement. Although, like other forms of PPI, distributors of retail PPI face little or no competition when selling the product, the CC has not been convinced that in this case the advantages for retail PPI customers of introducing the prohibition would outweigh the costs-not least because research suggests that many customers are unlikely to search for alternatives given the relatively small sums typically involved.
The CC will publish its final decision on whether to implement the point-of-sale prohibition for other forms of PPI in the early autumn.
The final CC report into PPI was published in January 2009 and was the subject of a legal challenge to the Competition Appeal Tribunal (CAT) by Barclays, supported by Lloyds Banking Group and Shop Direct Group Financial Services Ltd. Whilst upholding the CC’s conclusions as to the competition problems in this market, the CAT ruled that the CC must in particular consider further the role and importance of a potential drawback to the point-of-sale prohibition, namely that it might inconvenience customers.
Since then, the CC has carried out a detailed analysis of the likely effects of such a prohibition including undertaking customer surveys, and an assessment of parties’ internal documents and of various experiments looking at the possible impact of splitting the sales processes of credit and PPI.
The CC will now invite comments on its proposals for retail PPI before publishing its final verdict along with that for the rest of the market in September. Comments on the draft decision are now invited by 3 September 2010.
