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The Actuary The magazine of the Institute & Faculty of Actuaries

Payment protection insurance practices under fire

The Office of Fair Trading (OFT) recently received a super-complaint from consumer group Citizens Advice (CAB) concerning the payment protection insurance (PPI) market. In addition, the Financial Services Authority (FSA) has recently concluded that sales practices for PPI are ‘very poor’ in most sectors.The super-complaint makes numerous criticisms of the current market, including:

  • The sales process – the ‘take it or leave it’ sales pitch of these products means that customers are given little opportunity to assess the comparative merits of other policies on the market and are often mis-sold policies under which they are not eligible to claim.
  • Product design – many PPI products exclude the most common situations in which people find themselves unable to service their debt. In any event cover, when given, is often insufficient when customers encounter the most severe problems.
  • Price – the cost of PPI often represents a large proportion of the associated credit and lenders will often charge additional interest on the premium.
  • Value for money – many PPI products give poor value for money and could ultimately lead to increased debt.

Recommendations to tackle these problems have been put forward in the report and CAB has demanded action from FSA, OFT, and the Treasury select committee.