Not what you sell, but the way you sell it

In recent years, few insurance products have sparked as much controversy as payment protection insurance (PPI). As unemployment soared in the wake of the recession, suppliers of PPI products came under fire for poor marketing and mis-selling after insurers’ widespread failure to meet the claims of those who had lost their jobs. The fall-out led to an industry-wide scandal, and an FSA clampdown, while the Competition Commission has since mooted enforcing a ban on point-of-sale PPI.

But the chartered provider of Biba’s new Committed Payments Plan scheme, Millennium Insurance Brokers, is on a mission to tackle the product’s tarnished reputation and give it a makeover. The scheme is only available through Biba brokers, and underwriting director Stephen Clowes believes it will go a long way towards addressing the market’s concern with traditional PPI.

He argues that the actual product still serves a vital consumer need. “The product itself is a very valuable protection, and all regulators have said that. The issue has always been in how it is being sold,” he explains. “The simple fact is that if you lose your job, it can finance your commitments while you can’t.”

He adds that having provided PPI for many years, the broker took a long, hard look at how it could repackage the product and better serve customer needs. “We obviously took into account what the FSA had said about the common failings in how PPI is sold, and also the Competition Commission’s talk about bringing a total ban on point of sale. We started thinking about all the complexities of PPI and why there were problems with it,” he says.

Standing alone

Clowes believes the problems that people have with traditional PPI are largely due to its linkage with loans such as mortgages or their credit cards. “So we turned the whole thing on its head and said ‘well, you don’t have to have a mortgage or a loan or a credit card’,” he says.

In contrast to traditional PPI, which is generally linked with the provision of loans, the scheme product is a standalone product and can be sold with or without a mortgage or a personal loan. Instead, Clowes says, customers can opt to cover regular bill payments that they are committed to, in the event of unemployment or inability to work due to accident, unemployment or sickness.

“This is helping the customer to think about what committed payments they have to pay for. They don’t have to link it to anything; they just have to make a decision on the total commitments that they have to make,” he says.

“It is standalone, portable, flexible and renewable, and it puts the customer in complete control of the choice of products they want and gives brokers the ability to sell a product that is going to protect their customers’ demands and needs.”

In addition, one of the main features of the product is that, unlike many of the traditional linked PPI products, it can be renewed on an annual basis. Clowes believes this will address the FSA’s concerns about the interest charges on single premiums and also monthly charges of traditional PPI where providers could, in theory, change terms and conditions as often as every 30 days.

In addition, he explains that if a ban on point-of-sale PPI goes ahead, it paves the way for the product to become known mostly for being an annually renewable product, like household and motor insurance. Clowes argues that if this comes to pass, the logical distribution channel is via insurance brokers.

Features and benefits within the scheme include payment protection, which covers bill payments of between £200 and £2,000 a month, as well as an optional extra of life cover, which covers a fixed payment of between £200 and £4,000. Clowes adds that the monthly cover charge for payments of £500 a month is between £25 to £29 a month.

All the packages include back-to-work assistance, which can provide advice in writing CVs, improving interview skills and providing access to job vacancy databases, as well as legal assistance in appealing or defending disputed employment contracts or negotiating a settlement for bodily injury. The choice of excess period is 30 days, 60 days and 90 days.

In addition, the scheme includes an alternative Biba unemployment cash plan of £1,000 in the event of unemployment, which also includes back-to-work and legal assistance at a monthly payment of around £9 a month.

Convince the doubters

Unsurprisingly given the negative publicity surrounding PPI, Clowes admits that insurers have been wary of taking up the new product, fearing a backlash. “Insurers were concerned about how such a product might be sold and what the quality of the selling advice might be,” he says.

But he adds that the promise of a broker distribution channel has helped ease the fears of underwriters and insurers about the potential for future mis-selling. The product has got a carrier in the shape of Jubilee Managing Agency, which Clowes says “was happy to consider the product on the basis that it was a Biba membership product and not just an independent one offered on the internet”.

Selling this product via brokers, he adds, will also go a long way towards placating the FSA and the Competition Commission. “What we needed to do was prove to the regulators and Commission that this market is a viable alternative to the historic PPI sales channel that they obviously don’t like,” he says. And the best way to demonstrate that? Satisfied customers. IT

Further information

For more on Biba committed payments plan, go to www.biba.org.uk/BibaSchemes.aspx

To register for access to the free online Biba Committed Payments Quote & Buy system, go to www.millenniuminsurance.co.uk/MIBCorporate/ApplyOnline.aspx