PPI sales set to be barred at point of sale

A ban preventing the selling of payment protection insurance (PPI) at point of sale is set to go ahead, the Competition Commission has said in a provisional verdict.

But the Commission appears to be having second thoughts in the light of new evidence.  

If the ban comes into effect, there will have to be a seven-day gap before PPI can be sold to customers taking out mortgages and other loans.

The idea is to give consumers breathing space to think about whether they want PPI and allow them time to shop around.

PPI could still be sold at point of sale to customers who specifically request it.

Peter Vicary-Smith, chief executive of Which?, welcomed the provisional decision. He said: “People need to protect their finances but PPI has been widely discredited because of its expense and the poor cover it offers.

“Point of sale PPI puts consumers in a position where they have to choose between a shoddy protection product or no protection at all.

“It’s important that PPI is sold separately from other financial products to help consumers make an informed choice and find the protection product that best suits their needs.”

The Commission has said it hopes to have a final verdict on the matter by July. But it is by no means certain that the ban will go ahead after new evidence was put to it.
 
Consumer research by GfK found that although retail PPI customers liked the idea of breathing space, in practice they were unlikely to hunt around, feeling that any savings did not make it worth their while.

In a notice on its website, the Competition Commission now says: “This new evidence suggested to us that customer inertia, driven by low balances, meant that we could not be sure that by imposing a point-of-sale prohibition alongside the other remedies, we would encourage sufficient customers to search to generate an effective competitive constraint on retail PPI providers.”

A point of sale PPI ban was proposed by the Commission in January 2009 after an Office of Fair Trading investigation.