Watchdog must put the bite on the payment protection insurance market
FINANCIAL ADVISER - 1ST FEBRUARY 2007
Many people have been critical of the FSA over payment protection insurance and felt the regulator had not paid due attention to the biggest and worst offenders in the market.
It appears this is not the case. In the first instance, it looks as if sales of policies to client who were not eligible for cover in the first place and single premium policies will bear the brunt of the enforcement actions.
However, in line with treating customers fairly, the regulator must also be looking to question providers over the design and pricing of their policies, the commissions attached to them and the claims ratios they achieve. In none of these areas do policies really work in favour of the end user, and certainly it would be difficult for the vast majority of banks and lenders in this market to make any sort of realistic representation that client needs form the focal point of their payment protection insurance activities.
For firms publicly found wanting in the coming weeks, the fine handed down by the regulator will only be the start of their problems. In seeing their provider fined for mis-selling payment protection insurance, many clients will look to assess their own policy and see if it holds up to any sort of scrutiny. Now that some claims firms have begun to farm the market for possible instances of mis-selling, it will not take long for numbers to build. If this happens, any FSA fine will pale into insignificance alongside compensation costs.
Now the FSA has the bit between its teeth, it has more than enough snap in its jaws to get the market back into line and must be applauded for doing so. The faster it can drive through these changes the faster it can provide the client protection its regime was established for in the first place.
Stewart Hastings
Office manager
British Insurance
Braintree
