Inside PPI Insurance Compensation
In alot of respects the Fsa(Fsa) has an unenviable task and findingthe right equilibrium between commercial enterprise and consumer protection is no easy job.
What must be colossally maddening for the watchdog in Canary Wharf is that in some of its communications to the market it is criticised for being too technical and long-winded, while in others where it speaks frankly of the issues that exist, little seems to happen.
This is extremely true of the payment protection insurance (PPI) market, which has been under scrutiny for many months. Despite clearly outlining the issues it has found, there continues to be a number of firms that have done little or nothing to bring their product design and sales processes up to scratch and now face sanctioning from the Fsa as it steps up its enforcement action in this area.
Serious problems
Releasing the newest findings from its ongoing thematic review of the PPI market, the Financial services authority said that a number of serious issues stopped in the market and it was disappointed that there had been no improvement since its last round of mystery shopping. It stated: “Many firms are still not giving clients clear information about the product and what it will cost; not telling them the extent to which they are eligible for PPI cover and what they are covered for; and not telling them why, where advice is given, the recommended policy meets their needs and demands.”
Not only is the regulator worried that firms are falling short of the requirements made by ICOB, but also that its ‘Treating Consumers Fairly’ (TCF) principles, which should be federal to any business in the market, are not being taken seriously. The Fsa has perfectly set out a timetable for firms to get their act together on TCF and in its PPI report, it added: “We have set firms a deadline of December 2008 to complete their work on TCF and to demonstrate they are devotedly treating their consumers fairly in all aspects of their business, as well as PPI.”
Although there is undoubtedly a lot of work for some PPI brokers and providers to carry out if they are to reach the Fsa’s benchmark, there are also a number of firms that have worked hard to ensure the PPI they offer works effectively for patrons.
Important role to play
Nobody doubts the effectiveness of PPI as a consumer safeguard and so as long as it is sold appropriately it has an important role to play. The key to any financial product is that it fits in with the needs, circumstances and budget of any prospective client.
There is also no reason why the purchase and administration of PPI needs to be overly complex or misleading. Front end IT systems should make it easy for regulars researching the market to see what is available and allowing them to speak to underwriters will help them get the unsurpassed price for the most suitable product.
By monitoring back end performance and reviewing cancellation rates, complaints and claims declinature rates it becomes possible to address issues where they exist, make improvements for the future and perfectly demonstrate that TCF is a key concern.
Despite the issues that have been raised over the PPI market, there are wonderful opportunities for those who are prepared to invest the time in getting their approach to the insurance right.