Seeing is believing
MORTGAGE SOLUTIONS - 3RD SEPTEMBER 2007
While there are encouraging signs that the protection industry is moving in the right direction on payment protection insurance, Simon Burgess calls for increased vigilance.
Payment protection insurance continues to be a drag on the protection industry. Many providers have effectively put the product into limbo, while the FSA reviews the markets transparency and sales processes. However, one provider has recently broken ranks and attempted to address the situation.
Nationwide has announced the withdrawal of the sale of all its credit card and loan payment protection insurance policies after it found problems within its own sales processes. The society is going to retrain all staff involved in selling payment protection insurance before allowing the resumption of sales.
In many ways, Nationwide will be glad that it has discovered the problem for itself, and it has taken quick effective action. Rosemary Callender, spokesman for the Nationwide, says: “A mystery shopping exercise found that some employees were not following our sales procedures, so we are providing further training. We are intending to re-enter this market, it is a temporary arrangement while we review the training of our staff.”
Nationwide has not said what the exact problem was, however, the fact that all of the staff involved are being sent back to the classroom is an indication that the issue is deep-rooted and central to the sale of the cover.
Although the society is to be commended on its quick action, it is nonetheless depressing. When one of the biggest and most reputable financial providers in the UK has discovered problems in this area, it does not bode well for other providers in the market.
The FSA has kept its own counsel and is yet to make comment. However, there is little doubt that behind closed doors, the regulator will be watching the situation very closely to ensure that this market is dealt with as it should be.
Having discovered a problem in its sales processes the society has recognised that it is going to be important that an overhaul of policies already sold to the public is undertaken to address any potential mis-selling issues. Nationwide has said it will review a sample number of cases and then decide whether it needs to revisit the whole book of business. This would be a good strategy for other firms in the market, keeping a close eye on sales and reviewing them periodically will help keep them on top of any potential problems and monitor the quality of advice being given to clients.
The last thing any provider wants is to have to go back over each and every case, but if it turns out there has been any real threat of consumer detriment then this is exactly what they must do, no matter how long it takes or how expensive it proves to be.
Not only is this imperative to ensure that clients’ positions are protected, but for those who have unearthed problems, it will also help them rebuild any damage done to their reputation and let them state without fear that the problem has been dealt with. It is always difficult to know just how damaging such incidents can be to a firm’s reputation, but they certainly do not help build consumer trust.
Despite the problems found in its credit card and loan payment protection insurance sales, Nationwide has been able to point out that there is nothing wrong with its sales of mortgage payment protection insurance cover and that it has no plans to discontinue the cover to borrowers.
However, providers across the market will be keen to ensure they can be confident in the procedures they have in place and avoid any further negative publicity in the future. Too often financial product providers in the UK have made very public and bold statements about the quality of the products and services they offer, which turn out not to be quite as representative of their offering as they thought.
In many ways, this has undermined the financial markets as a whole, and it is little wonder that high street grocery brands are now valued by some customers more highly than our traditional financial institutions when it comes to buying certain products.
Offering a consistently excellent service that meets all of marketing and advertising messages is the only way that trust will be rebuilt in many of the retail financial markets, and protection insurance has perhaps the farthest way to travel.
A lot of problems have already been highlighted in the payment protection insurance market as it currently stands and in many ways the issues raised by Nationwide are a good thing, as it helps to keep the sector in the public eye and ensure providers seek to improve their offering.
Investigations and research into the protection sector are still ongoing and by next year, changes to the regulations and market structure should help to provide a clean slate from which the market can build.
There is no doubt that a lot of improvements have already been made, but there is still a lot more that can be done. If companies like Nationwide are finding issues to address, then it is likely other are also making mistakes. Hopefully, these can be found and dealt with over the coming months, and the protection sector can make a clean breast of things in the New Year.
To help maintain momentum, other firms finding errors would be frank in explaining where the problems have been and the remedies that have been taken once they have completed their own investigations. This will help highlight particular parts of the process that need to be kept under the microscope, allow the market to take confidence in the fact that problem has been dealt with, and let others learn form the industry’s mistakes.
Simon Burgess is managing director of Britishinsurance.com
