UK: FSA update on payment protection insurance

Last Updated: 8 November 2005
Article by Paul Edmondson and Nick Paul

FSA have today released a report which warns the financial services industry to address urgently serious concerns it has relating to the sale of payment protection insurance (PPI). This is a critical issue for those selling and underwriting PPI who have been told they must take urgent action to ensure they are complying with FSA rules, including ‘treating customers fairly’.

Please see below for the full article containing:

  • a summary of the key findings of the FSA report
  • follow-up steps to be taken by FSA

Full Article

FSA have today released a report (The Sale of Payment Protection Insurance – results of thematic work), which warns the financial services industry to take urgent action to address concerns it has relating to the sale of payment protection insurance (PPI). The report is based on a series of firm supervisory visits and mystery shopping undertaken during the summer.

While FSA acknowledges that PPI can provide worthwhile cover for some consumers it is concerned that selling practices in certain sectors mean that there is a risk that it is sold to customers who are unable to make valid claims or who will receive only a limited benefit from the product. FSA reports that the thematic review showed that while the sales of regular premium PPI with prime mortgages were generally compliant, there were significant concerns in relation to PPI sold in other market sectors.

Clive Briault, FSA Managing Director for Retail Markets is quoted as saying that:

"compliance standards in other areas of the market, notably single premium PPI business, are generally weak… this poses a serious risk to consumers because of the poor disclosure of product and price details; the possibility that consumers may not be eligible to claim against their policies; and the fact that consumers may not be aware that they may receive little money back if they cancel these policies early."

FSA surveyed 30 firms selling PPI with credit and store cards, catalogues, secured and unsecured loans and sub-prime mortgages. Key points of their findings included the following:

  • inappropriate sales - around half the firms failed to take reasonable steps to ensure the potential policyholder was eligible to claim under the policy. FSA emphasises the difficulties that the current complex products cause for sales staff in checking eligibility to claim under all sections of the cover and ensuring a compliant and fair sales process. There is no specific requirement in FSA's Insurance Conduct of Business rules (ICOB) to carry out eligibility checks for non-advised sales. Is this an example of FSA legislating by the "back-door" by using its general Principles to impose additional requirements on firms?
  • inadequate controls relating to non-advised sales – around half the firms did not take appropriate measures to ensure staff did not give advice
  • advice – most was poor, staff failed to adequately assess product suitability
  • over-reliance on product documentation – most firms selling over the telephone did not give sufficient information relating to policy exclusions
  • poor quality and timeliness of product disclosure – in respect of some firms selling single premium policies
  • level and structure of inducements and targets – in some small and medium firms which could encourage mis-selling
  • training and competence – at inadequate levels in around half the firms
  • level of compliance monitoring – variable and, in some cases, poor.

Following this thematic work, FSA has confirmed that it will follow up by:

  • contacting firms to give detailed feedback on its findings and requiring them to address any problems raised
  • referring some firms identified in the thematic review as having serious issues for further investigations with a view to possible enforcement action
  • completing a second round of thematic work, early next financial year, to check that standards have improved
  • put new PPI information on its consumer website, which they are advised to read before purchasing PPI
  • meeting with trade associations to seek their commitment to changing and improving the market.

FSA are also currently liasing with the Office of Fair Trading (OFT) regarding the handling of the super-complaint received in September from consumer group, Citizens Advice (CAB). In their report, which forms the basis of the super-complaint, CAB made various (including competition based) criticisms of the PPI market, which included, that it was too expensive. CAB have called for intervention from OFT, FSA, the Competition Commission (CC) and the Treasury Select Committee. OFT must publish its response on what it intends to do by mid December. Such response could include a market study to gather further information or an immediate reference to CC for a market investigation.

CC has recently published its preliminary findings on the store card market and associated insurance, which includes PPI. The findings indicate that there is a lack of competition in relation to PPI pricing. For more information regarding the CC store card investigation and the super-complaint, please see our previous Law-Now, Criticism of the payment protection insurance market, published on 29 September 2005.

To view this article in full, please click on 'next page' below:

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 04/11/2005.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

This article is part of a series: Click Criticism of the payment protection insurance market for the next article.
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.