CC doubts point-of-sale PPI ban would be effective

The Competition Commission has expressed doubts that a point-of-sale ban on payment protection insurance would encourage competition in light of new consumer-based evidence.

In a notice published on the CC’s website today, the commission suggests that it has moved away from an outright ban on point-of-sale PPI following consumer research by GfK on customers’ interest in searching for alternative PPI deals.

GfK found that although retail PPI customers liked the idea of time to think about their policies and search for better deals, in practice they were unlikely to actually take the time to search.

As customers generally pay small monthly insurance premiums the payments were not judged significant enough to warrant looking for a better policy.

The notice 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.”

The point-of-sale PPI ban was first mooted by the CC in a report published in January 2009, after the Office of Fair Trading referred the PPI market to the CC for investigation in February 2007.

The 2009 report also suggested a ban on the sale of single premium PPI. The CC states in its latest notice that it did not find any single premium retail PPI products, but it would still like to see a requirement imposed that customers do not have to pay additional charges for setting up or cancelling a policy.

The CC has asked the industry for its feedback on a ’remedy package’ that would boost consumer choice on PPI.

It includes options such as an annual review, an obligation for providers to remind customers of their rights towards the end of their cooling-off period, and price caps to curb high PPI prices and bring them down to more competitive levels.

The CC says any remedies should apply to all retail PPI providers. Interested parties who want to contribute to the inquiry should do so in writing to the CC by June 4.