The Financial Services Authority recently fined five motor
retailers a total of £175,000 as part of our campaign to improve
the way payment protection insurance (PPI) is sold. The fines were
for failings which exposed 2,175 customers to the unacceptable risk
of being sold a PPI policy which was not suitable for their

These fines follow visits to motor retailers to check up on
sales practices. The problems we found in the five firms we fined
highlight some of the main issues motor retailers need take into

Outlined below are the key findings from our investigations and
highlighted areas motor retailers selling regulated products to

Making sure the product is suitable

The firms failed to gather sufficient information about
customers to ensure the PPI policies they were recommending were
suitable. Two firms routinely offered the most expensive level of
cover, rather than considering the most suitable level. One firm
didn’t adequately assess whether customers were eligible to claim
benefits from the PPI policy sold to them.

Retailers must ensure that customers are eligible to claim
benefits from the PPI policies they have been sold. If advice is
given, staff must ensure that the policy is suitable for the

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We also found that some firms did not train their sales staff
adequately to understand what information they should gather and
why it was necessary. This led to the unacceptable risk that
customers would be recommended a PPI policy that was not

All employees who sell PPI should be competent to do so. We
would expect firms to be able to demonstrate the training programme
they have in place.

Demands and needs statement

We found that demands and needs statements were inadequate in
all the cases. They did not allow the firms to demonstrate that
eligibility or suitability had been fully assessed and considered.
In particular, it was not always clear why a particular product had
been recommended.

Systems and controls

Some firms failed to carry out formal and regular monitoring,
which meant that management was unable to satisfy itself of the
effectiveness of its sales process or that it was being properly

The failure of some firms to produce management information
meant that senior management were unable to identify any potential
shortcomings in the firm’s PPI sales processes.

One firm did not assess complaints received from customers in a
fair manner, sometimes automatically rejecting complaints with no
further investigation.

There must be adequate systems and controls in place to be able
to ensure an effective sales process that treats customers

The majority of motor retailers have now been subject to FSA
regulation for over three years, but we are still finding failings.
Whilst we recognise that financial services is not dealers’ main
line of business, we still expect retailers to have systems and
controls in place and to meet the same standards that are required
of the rest of the financial services industry.

We encourage all motor retailers selling PPI to work with us to
ensure customers are treated fairly. Our free motor retailers
roadshow, taking place on October 2 in Leeds, includes a session
dedicated to PPI and treating customers fairly. We also plan to
attend a series of events the Retail Motor Industry Federation is
holding to help motor retailers with any regulatory issues you are
facing. More details of the help available can be found at our

Andrew Honey, head of insurance, Small Firms division,
Financial Services Authority