Competition Commission details PPI probe

The Competition Commission has published a draft order for consultation setting out how measures to introduce competition into the Payment Protection Insurance market will be implemented.

The measures were outlined when the CC published its final report into PPI in January this year, concluding that businesses that offer PPI alongside credit face little or no competition when selling PPI to their credit customers. To address the lack of competition, the CC announced its intention to introduce a package of measures to bring competition in the market including: a prohibition on the sale of PPI during the sale of the credit product and for seven days afterwards; a prohibition on single-premium policies; and Personal PPI quotes, annual reviews and other measures to make sure that improved information is available to consumers to make it easier for them to compare and search for products and switch policies at a later point.

Peter Davis, inquiry chairman and CC deputy chairman, said: “Whilst we are waiting for the outcome of the appeal, we are pressing ahead with the detailed work needed to put these measures in place. By continuing with the necessary preparations like this, we can hit the ground running once the appeal is finalised and we have considered the CAT’s judgment. If the CAT supports our findings, taking these steps now will help ensure there is no unnecessary delay in resolving the significant competition issues that we found in this market and in delivering a better outcome for consumers.

"This public consultation is an opportunity for all PPI providers and others with an interest in the effective operation of PPI markets to comment on the way in which we plan to implement these important measures.”

In its final report, the CC said that the vast majority of the UK’s more than 12 million PPI policies are sold at the same time as a consumer takes out a loan, credit card or other type of credit. The CC found that many consumers are unaware that they can buy PPI from other providers, rarely shop around to compare prices and terms and conditions of PPI policies, and rarely switch PPI providers. The resulting ‘point-of-sale’ advantage makes it difficult for other PPI providers to reach credit providers’ customers and in the absence of such competitive pressure, consumers are charged high prices.

During the inquiry, the CC liaised closely with the industry regulator, the FSA, which takes the lead on regulating sales practices and tackling mis-selling, as well as the Financial Ombudsman Service. The CC’s focus was been on examining whether there is effective competition in the market as a whole.