Why, oh why payment protection insurance
NICHE PERSONAL LOANS - 1ST NOVEMBER 2007
Dear NPL,
The Financial Services Authority (FSA) has released its findings from its ongoing thematic review into the payment protection insurance market and for those of us who were hoping for some positive news the results are severely disappointing.
The regulator has now visited over 200 firms during the course of its review and there ban be little doubt as to how many are failing to take the action required. The market is not being persecuted as some have said, but rather being held to account for the way it does business.
If companies involved in this sector are not prepared to take positive action to address the problems that have been highlighted by numerous investigations, they should simply up sticks and leave.
Unsurprisingly, single premium providers came in for a walloping from the regulator and half of the shoppers involved in reviewing this sector were not given a statement of price and, again, les than half were told about policy limitations and exclusions. Indeed, in only 13% of visits were shoppers told that the cover was a single premium policy or had it explained to them in a manner they could understand.
Things are not much better in the monthly policy market, where almost two thirds of firms visited were unable to demonstrate they had taken sufficient step to ensure their sales processes met the required standards.
At the beginning of September the chief executive of Hadenglen Home Finance plc was personally held liable for the company’s failings in relation to selling payment protection insurance. He picked up a fine for £49,000 from the regulator, while a further fine of £133,000 was handed down to the firm.
Only now that the regulator has shown its willingness to hold individual board members responsible for the actions of their companies can we expect there to be a significant improvement.
To date it has been too easy for those selling payment protection insurance to duck out of their compliance requirements and, although a number of firms have been hit with substantial fines, they do not hurt quite so much when they are being settled with the company cheque book.
There are a number of enforcement actions under consideration and, if the FSA follows the same line of punishment and demands that executives are held personally liable, surely we will see firms making some much needed changes.
This stricter approach from the FSA will be painful for many firms. However, in refusing to alter the way they do business, they have put potential consumer detriment to one side of the sake of profit and perhaps this more focused approach against responsible individuals is going to be the only language they understand.
Simon Burgess
Managing director
British Insurance
