Monday, 09-June-2008
Banks and insurers have warned that proposed changes to payment protection insurance (PPI) could destroy the market, leaving thousands of people in debt should they lose their jobs.
The Association of British Insurers said proposals by the Competition Commission to reform the £5bn-plus PPI market could prompt companies to stop offering the cover.
"We are very concerned that the Commission's proposed remedies could destroy this market, particularly while we are facing a period of economic uncertainty," the Association of British Insurers said.
Angela Knight, chief executive of the British Bankers' Association, said: "If the recommendations are adopted it could leave customers exposed just as economic conditions are worsening." More on insurance
The comments came after the Commission released the findings of its 16-month investigation into PPI. The Commission said it was looking at ways to encourage consumers to shop around. Possible changes include temporary price caps and making it compulsory for lenders to tell borrowers that cover can be bought from third-party providers. To encourage consumers to consider switching to cheaper deals after taking out a policy, the Commission said it was considering forcing lenders to ask consumers to renew their policies annually. Most PPI policies are sold to protect consumers with personal loans, credit cards, mortgages and unsecured loans. The insurance is designed to cover repayments should the policyholder be made redundant or be unable to work because of sickness or an accident.
But the high price of the cover, and the feeling among consumers that the terms of policies are misleading and do not pay out when they are expected to, has drawn criticism. In September 2005, the charity Citizens Advice made a complaint to the Office of Fair Trading, which referred the market to the competition watchdog last February. Yesterday the Commission said consumers are paying £1.4bn a year more than they should on PPI, because they do not realise they can shop around. Mike Pullen, partner at law firm DLA Piper, said: "The Competition Commission should be looking at more transparency for the consumer before or at the point of sale. Other remedies such as temporary price caps are draconian and won't work." Source: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/06/cnppi106.xml |
