Bringing back the consumer faith in PPI

The payment protection insurance sector is in a state of limbo: after years of mis-selling investigations and the 2008 publication of the Competition Commission’s remedial measures, it was hoped that providers would meet the Commission’s deadlines of April and October this year.

April was to witness the start of greater information disclosure, including separating the PPI quote from the loan offer. October was to herald a seven-day ban on providers selling cover alongside their credit.

But following a successful appeal by Barclays, the Commission has had to revise its timetable. It has published a PPI remittal consultation paper, inviting feedback on the revised models it will use to assess whether its remedial measures will positively affect consumer welfare.

In the meantime, what can PPI providers do to restore consumer confidence in this sector?

1. Restore supplier confidence

Supplier confidence leads to consumer confidence and, given the scrutiny and criticism we’ve all endured, it is understandable that there’s little appetite to offer this cover. But the current climate dictates consumers need PPI more than ever and we have a social responsibility to maintain the provision of cover, extol its benefits and so lessen the financial hardship a job loss will bring.

2. Stabilise premiums

We should not be increasing premiums in order to put the cover out of the reach of many people. Hardening rates in the midst of a recession is the easy option, but wouldn’t more robust selection procedures negate the need for this?

3. Extend cover to better reflect consumers’ lifestyles

Traditional mortgage policies are unsuitable for the increasing numbers of people renting properties or in shared ownership schemes. Similarly, loan and credit card cover is restrictive on its pay-outs. Policies must be adapted to cover what consumers identify as their top financial priorities and not what providers deem to be appropriate.

4. Simplify the process

In September, the Commission undertook research to assess whether consumers understood the information contained in PPI quotation forms and annual statements. Respondents who already purchased cover said the selling process was characterised by a fear of feeling stupid. The consensus from the respondents was that important information and cover details should appear upfront, followed by the price quote and terms and conditions.

5. Outline the rules of the game

Highlight the cover restrictions upfront – it’ll save consumers money, time and anguish, and reduce the number of rejected claims.

6. Greater collaboration between marketing, underwriting and compliance

‘Key facts’ information, for example, is written to satisfy FSA rules, but what about satisfying customers? Marketing aims to sell the cover yet isn’t usually involved in the production of this.

Providers must use this period of uncertainty to closely scrutinise their products and processes in order to be well placed to meet consumers’ needs and the Commission’s recommendations. If it does, it might just recover from its public berating. IT

Nel Mooy is managing director of British Insurance.