The Office of Fair Trading (OFT) is holding a feedback session on 24 August 2006, to offer the insurance industry the chance to comment on the key issues identified by the OFT in its on-going market study into payment protection insurance (PPI). It will also be possible to submit written comments to the OFT. The session is not open to the general public or the press.
The OFT has been studying the PPI sector since December 2005, following a super-complaint submitted by Citizens Advice.
This is part of long-running competition and regulatory investigations into various aspects of PPI. A number of lenders are currently subject to FSA investigation in relation to PPI sales and the FSA has published thematic work on PPI which the OFT is considering within this market study. The issue of cancellation of PPI and refunds of single premiums is also being looked at by the FSA under the Unfair Contract Terms in Consumer Contracts Regulations 1999. The OFT is continuing to work closely with the FSA in this area and is looking at the scope for a coordinated strategy for regulating PPI and related credit products.
The OFT has published the "emerging issues" in its market study, which will be the focus of the 24 August session. These issues include:
- There is a very low claims ratio. This could suggest that gross profits are very high and that customers receive poor value;
- Commission rates are very high - on average over 60% of net earned premiums. The OFT has concerns about the level of rates, the fact that rates have not decreased when new players enter the sector and the extent to which commission levels are linked to costs;
- There appear to be significant differences in prices for PPI which cannot be accounted for by differences in quality;
- Consumers face difficulties in getting clear information about PPI, particularly product prices and details;
- The OFT has found that there appears to be little competitive pressure in the market for selling PPI to consumers.
If you wish to attend the OFT's feedback session you must act speedily, as your details must be e-mailed to the OFT by 9 August and places will be allocated on a first come first served basis. If you are unable to attend in person, you may submit comments in writing by 24 August 2006.
For the text of the OFT's emerging issues document, please click here. For detail of how to sign up to attend, please see the OFT's statement on the feedback session.
We shall be happy to assist in the preparation of submissions.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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 07/08/2006.
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