Trade Association Proposals for the Payment Protection Insurance (PPI) Market
Record of meeting on 31 July 2006 between trade associations and the FSA.
Attendees
The list of those present is below.
Background
This meeting follows on from the meeting held on 6 April 2006.
Progress by trade associations
The FSA thanked the group for the reports they had provided before the meeting giving an update on the progress made on delivering the work they had committed to at the last meeting. The FSA gave a brief summary of current progress as follows:
- Improved sales procedures and training
The FSA welcomed the work and continuing progress made on training by several of the trade associations. - Consumer information
The FSA noted it had provided comments on the draft consumer guide produced by some of the trade associations, and noted the further work to be done on this including involving consumer organisations such as the Citizens Advice Bureau, possible consumer testing and developing a distribution strategy. - Refunds on single premium policies
The FSA explained it had published undertakings from some insurers that they would not use a nil refund clause in single premium payment protection insurance (PPI) policies when the loan is cancelled early. Having published these undertakings the FSA expected the rest of the industry to follow them. It noted the work the trade associations are undertaking on the issue of nil refunds when the loan is not cancelled; the amount of refund provided; and in improving the clarity of disclosure on the levels of refunds. - Standardisation of information on price and key product features
The ABI reported it had conducted research on a large sample of policy summaries. It found that headings on the summaries are to a large extent already similar. Further scoping is planned with members to consider whether there is a need for industry guidance on the common use of terminology. It was noted this work was progressing more slowly than originally planned and the FSA asked the trade associations to continue to work with their members. - Consistency of interpretation guidance
It was noted the revised guidance had been agreed with ABI members and insurers were implementing it. - Claims handling including providing evidence medical evidence at point of claim
The FSA noted progress of work being made in this area. For example, when a loan goes into default, customers would be reminded to check their PPI policies. - Baseline products
The FSA noted progress made with the changes to the mortgage payment protection insurance (MPPI) baseline by the CML and ABI.
The trade associations agreed in principle to make public their commitments and the timescales for implementing these by the firms. It was agreed they would aim for some form of publication around September. They confirmed they shared the FSA’s sense of urgency in delivering these commitments but pointed out that progress in the roll out of the various strands of work may differ between individual firms and would depend on firms’ timescales for making systems and documentation changes. The FSA encouraged trade associations to maintain the momentum that had been created when agreeing timescales for implementation with their members.
In discussion, the following additional points were raised:
- Some of the trade associations thought it would be useful to get the input of consumer organisations on the areas they were working on before making any public statement.
- The FSA acknowledged that, while it welcomed the work being done by the trade associations, this work did not address the more fundamental problems in the market. The focus of the commitments was on disclosure material that it considered the consumer is not likely to read. In addition, the broader competition issues identified by the OFT remain to be addressed.
- The CML suggested that adding PPI to the product sales data (PSD) that firms are required to report to the FSA could help improve management information in the market. The FSA noted that including general insurance products in PSD had not passed cost-benefit analysis when the rules were originally formulated, but it had passed this suggestion to the relevant FSA team.
OFT update
The Office of Fair Trading (OFT) provided an update on the initial findings from its market study. It reported that it would publish an issues paper covering these findings shortly (now published) and would hold a session for feedback of views on the issues paper on 24 August (am).
Many of the trade associations expressed concern about the short deadline for feedback. The OFT said it would like any written comments by 24 August but would, of course, continue to consider comments received after this date.
PPI Phase 2 thematic work update
The FSA provided an update on Phase 2 of its thematic work. Visits to 40 firms had been completed and the findings were being analysed and compared to those in the Phase 1 report and Dear CEO letter. At a high level, the analysis covered PPI sales processes including disclosure, inducements, training and competence, and systems and controls. The Phase 2 work had looked at PPI sold with different types of credit, with the exception of PPI sold with prime mortgages, as these sales were generally compliant in Phase 1 of the thematic work.
Early analysis of findings suggested that while there is evidence improvements have been made and there is a commitment by many firms to improve, some concerns remain. The FSA provided examples of these concerns while stressing that the detailed analysis had yet to be completed.
The report on Phase 2 is due to be published at the end of September. This report will also provide an update on the work the FSA and the trade associations are doing on refunds relating to single premium policies. Ahead of the publication, the FSA will provide the trade associations with an opportunity to review the findings.
Conclusion
It was agreed a meeting will be held mid-September when the analysis of the thematic work has concluded to discuss this before publication. The trade associations agreed they would aim to publish around the time the FSA published the findings from its thematic work. The trade associations will provide an update on the planned publication of their commitments at the mid-September meeting.
Attendees
FSA
Clive Briault
Eleanor Linton
Andrea Konrath
Philip Eaton
Patricia Worthington
OFT
Rob Williamson
Trade associations
Jane Milne, Association of British Insurers (ABI)
May Nilsen, ABI
Chris Cummings, Association of Independent Financial Advisers/Association of Mortgage Intermediaries (AIFA/AMI)
Paul Rodford, Association for Payment Clearing Services (APACS)
Ian Mullen, British Bankers' Association (BBA)
Stewart Dickey, BBA
Peter Staddon, British Insurance Brokers' Association (BIBA)
Neil Johnson, Building Societies Association (BSA)
Chris Oakes, Consumer Credit Trade Association (CCTA)
Peter Williams, Council of Mortgage Lenders (CML)
Laurence Baxter, CML
Jim Harper, Finance Industry Standards Association (FISA)
Martin Hall, Finance and Leasing Association (FLA)
Steve Devine, Protect