PPI Competition Low
Distributors face “little substantive competition” when selling payment protection insurance, initial reports from the Competition Commission reveal.
The commission has today unveiled a consultation document detailing emerging thinking on its PPI market, although it says it is far from coming to any conclusions.
Peter Davis, inquiry chairman, says: “The evidence we have seen suggests that the cost of PPI is in some interest higher than the interest paid on the loans.”
He says it seems consumers are “relatively price insensitive” when deciding what products to buy and adds that the competition from alternative products such as income protection is limited.
He adds: “If that is the case then distributors might face little substantive competition when supplying PPI to those people who buy the distributors’ own credit product.”
The commission is currently undertaking a major survey of consumer behaviour in order to understand the extent of competition offered to them.
Davis says: “At the moment our evidence base appears to suggest there are separate markets for PPI and credit, but our survey and ongoing analysis of the parties’ data will help us make an informed judgement about this very important and challenging issue.”
The commission also looked at whether there is adequate competition between underwriters and whether or not companies that both underwrite and distribute PPI distort competition in the marketplace and does not see the need to investigate these areas any further.
But Simon Burgess, managing director of Britishinsurance.com, says: “People owing money to banks, building societies and other credit providers may have PPI bundled in with their loan so are not aware they’re paying interest on the insurance as well as the loan itself.”
He adds: “Not only are the premiums sky-high, but in many cases, the policies aren’t worth the paper they’re written on as they’re not appropriate for the individual’s circumstances.”
Tags: ppi claim, ppi compensation