Stand-alone PPI provider offers bespoke PPI solutions to secured loans industry
Investigation by Financial Services Authority on PPI sales practice signals imminent rule changes
Paymentcare.co.uk policy awarded five stars by independent product research group Defaqto
BROKERS concerned with adhering to the Financial Services Authority’s policy of Treating Customers Fairly (TCF) can ensure their secured loan customers get a fairer deal on payment protection insurance(PPI) by offering a stand-alone monthly paid policy, says independent PPI provider Paymentcare.co.uk.
Stand-alone PPI policies offer customers a credible alternative to expensive lenders-own offerings and provide much better value for money, says Shane Craig, managing director of Paymentcare.co.uk.
The recently published findings of the FSA's Insurance Conduct of Business (ICOB) review of the general insurance market indicate that consumers purchasing PPI continue to run a significant risk of signing up for poor value for money products.
"With the FSA due to publish a consultation paper this month (June)* setting out proposed rule changes to the way PPI is sold, it's highly likely that the soaring secured loans industry will need to address the issue in order to satisfy the ICOB recommendations," says Craig.
"Payment protection insurance is an integral part of the secured loans process and it's essential that intermediaries are aware of the PPI policies available to them. This will help to ensure that they treat their customers fairly."
Single premium loan PPIhas attracted considerable criticism since the investigation into PPI began.
"Since the launch of the Office of Fair Trading's investigation of the whole of the PPI market in September 2005, it has become abundantly clear that single premium loan PPI policies are not in the customer's best interest," he says.
"The cost of these policies is added to the loan and the whole amount then gathers interest, making the PPI exceedingly more expensive than necessary. A monthly paid policy from an independent provider offers far better value for money and can be cancelled at any time ensuring that customers only pay for the cover they actually need."
As a result of the watchdog's ongoing investigation of the PPI market, the Financial Services Authority imposed a £455,000 fine on Loans.co.uk Ltd in October 2006** for failures relating to its sale of PPI accompanying secured loans.
"Intermediaries must be clear on what it covers, what it costs and the fact that it is entirely optional," says Craig. "Because PPI is a secondary purchase and therefore not the customer's primary focus, it is often the case that they sign up for policies that they do not fully understand.
“By offering an independent option brokers can ensure their customers are buying PPIwith their eyes wide open.”
"Offering customers a stand-alone monthly paid policy will benefit both brokers and customers alike and will help to further strengthen the appeal of secured loans as a viable means of borrowing," says Craig.
* ICOB Review Interim Report: Consumer Experiences and Outcomes in General Insurance Markets published by the FSA, March 2007
** Public censure published by the FSA, February 2007