The government has confirmed that the Payment Protection Insurance (PPI) market will undergo a full investigation by the Competition Commission (CC).
It follows an (OFT) probe which uncovered evidence that consumers were not getting a fair deal and firms were doing little to improve the situation.
PPI is sold by many banks and credit card companies when you take out a new loan or card. It’s designed to cover your repayments if you become unable to work due to certain illnesses or injuries, or if you lose your job.
There are an estimated 20-25 million PPI policies in force in the UK but critics say the £5.5 billion PPI market is selling products that are vastly overpriced, difficult to claim on and in many cases sold to the wrong people.
Unfair sales tactics
An OFT investigation – which followed a ‘super complaint’ by Citizens Advice – was launched last year.
John Fingleton, Chief Executive of the Office of Fair Trading, said: ‘Our examination of the evidence presented to date gives us reasonable grounds to suspect that there are features of this market which restrict competition to the detriment of consumers.
‘Despite some evidence of a degree of consumer satisfaction with aspects of the product, the evidence as a whole suggests consumers get a poor deal.
‘This referral will enable the Competition Commission to undertake a thorough investigation of the market and, if necessary, ensure that appropriate remedies are put in place.’
Which? personal finance campaigner Pula Houghton said: ‘This is clear evidence of an industry that is systematically dysfunctional. It confirms Which?’s view that expensive PPI products, often not fit for purpose, are being consistently mis-sold.
‘Which? has said for years that bad practice is rife in the PPI market. It isn’t delivering adequate protection and people are being sold complex policies that they don’t understand, and which offer poor value.
‘The CC needs to take strong action to transform this industry. Better practice needs to happen right across the board; we are concerned that just giving out more information to consumers won’t be enough. The CC needs to stop companies selling inferior products to people who don’t know what they’re buying.’