Call to ban payment insurance
Updated on 13 November 2008
The competition watchdog is expected to call for a ban on the sale of controversial payment protection insurance alongside credit agreements.
The Competition Commission warned earlier this year that it was considering banning the sale of PPI alongside mortgages, loans and credit cards. It also said it may introduce a price cap as a temporary measure to reduce the cost of the policies.
Other improvements to the market the commission is expected to call for include giving better information to consumers on PPI to ensure they understand the product and to encourage them to shop around for the best deal, as well as measures to make it easier to switch between providers.
It may also call for a standard format to be used for calculating the price of the cover to make it easier for people to compare products, while firms may also have to tell people they can buy PPI from other providers.
It is also expected to propose a ban on the sale of so-called single premium policies, in which the cost for the entire term of the policy is paid up front and usually added to the debt being taken out.
PPI covers debt repayments if the holder is unable to work due to an accident or illness or if they lose their job. It has been the subject of controversy in recent years after consumer groups complained it was being mis-sold to people who would never be able to claim on it.
A 16-month investigation carried out by the Competition Commission which reported earlier this year found that consumers were being overcharged for the product by £1.4 billion annually due to a lack of competition in the market.
It blamed the situation on the way the cover was typically sold alongside credit agreements after finding that the vast majority of the UK's 14 million PPI policyholders were sold their policy alongside credit.
It said many people were unaware they could buy PPI from other providers and they rarely shopped around, while comparing prices was difficult due to the complexity of the product.
The commission also found that there was a belief among consumers that buying PPI increased their chance of getting a loan, and the cover is often bundled up into a credit agreement, making it difficult for other providers to gain a foothold in the market.
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