market moves on
The payment protection insurance (PPI) market has been the
subject of intense regulatory scrutiny in recent years. But a
recent Finance & Leasing Association conference heard that
there is appetite for change in the industry. The event aimed to
update members on the Competition Commission’s provisional findings
and proposed remedies for the reform of the PPI market, which have
drawn a mixed reaction from the industry.
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Conference chairman, John Lamidey from Cattles plc, observed
that in his experience of the financial services industry, markets
tend to move faster than regulators. His comment that markets can
be going forward while regulators are dealing with old issues
received much support from the 100-plus delegates.
Anthony Pygram, inquiry director from the Competition
Commission, confirmed that the retail distribution market is their
main cause of concern. He said that the Commission is now
undertaking a number of hearings regarding the proposed remedies; a
provisional decision on the PPI market will be made by the
beginning of October with a final report due in December.
Partner in Grant Thornton’s financial services group, Trevor
Newbury, highlighted the clear link between PPI and treating
customers fairly. He urged firms to be confident about all aspects
of their regulated activity and its governance. He stressed the
need for a robust audit trail under a ‘principles based’ regulatory
environment.
Peter Hinchliffe, lead insurance ombudsman at the Financial
Ombudsman Service (FOS) said that sales issues now formed the
majority of complaints received, with the lion’s share related to
non-disclosure of single premium policy product features. He warned
that firms were in denial about basic standards of insurance
selling and that there was an apparent systemic poor handling of
complaints. He made it clear that FOS will be looking at the
underlying issues.
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By GlobalDataLooking to the future, Drazen Jaksic, sales and marketing
director at Assurant Solutions, said that the industry has a choice
to make: implement change now or be forced to change. He urged
firms to move PPI away from purely focusing on debt to a product
covering lifestyle events that cause financial hardship. Assurant’s
own research revealed that consumers wanted greater flexibility and
innovation. Jaksic said that the industry should look at how
distribution and price will need to change, perhaps with the
introduction of a panel of insurers at the point of sale.
The challenge, according to Anthony Claytor of Hollydell, will be
to change consumer perception of PPI and restore confidence in the
product. He said firms should consider ‘rebranding’ PPI.
Alexander Phillips of the Financial Services Authority said that
while the FSA has seen evidence of positive developments, its
latest findings on the PPI market will reveal that little progress
has been made on sales practice and complaints handling.
Rod Revell, a technical consultant at Insurance Compliance
Services, closed the seminar, urging the industry to get to know
its customer base to develop the right products and sell them
appropriately. He was, however, passionate about the need to retain
single premium PPI, provided it was fit-for-purpose.
A common message emerged from the seminar: the industry
seriously needs to consider innovation in product design and to
review its sales processes, but the bigger challenge will be in
bridging the gap of distrust that has built up between it and
consumers over the years.
