We expect you to meet our treating customers fairly (TCF) requirement when you sell payment protection insurance (PPI).

5 habits for treating customers fairly when you sell PPI:

1. Ensure the customer is told that PPI is optional, where this is the case.
2. Ensure the customer is given clear information about the product and what it will cost.
3. Ensure the customer is given the assistance they need to be clear about what they are eligible for under the policy and what the exclusions are.
4. Where advice is given, ensure the customer is recommended a policy that meets their needs.
5. Ensure the customer is offered a fair refund if they cancel their policy.

Additional rules for PPI – introduced in January 2008

We introduced additional rules in the Insurance Conduct of Business Handbook designed to improve PPI selling practices. The new rules:

• require firms to give better oral disclosure of key information about PPI policies to help customer make informed purchasing decisions;
• require firms to establish that customers would be eligible to claims benefits under the policy; and
• increase the cancellation periods for PPI policies from 14 days to 30 days.

See our ICOB at a glance [PDF]

FSA review of good and bad practice

Our most recent review into PPI sales, published in September 2007, showed improvements in some areas, but also that many small firms were still failing to treat their customers fairly when selling PPI.

Poor practice we found included:

• Not explaining the PPI product clearly, including significant exclusions and limitations of the policy.

• Failing to ensure the customer was eligible to claim against the product.
• In advised sales, not finding out whether the PPI policy was suitable for the customer.
• In advised sales, poorly put together statements of demands and needs that did not explain the firm's recommendation or tailor the information to the individual customer. 
• Inadequate systems and controls in place around the sales process.  These  could result in sales staff not following the firm's own processes, and ultimately for inappropriate sales practices.

Action we have taken on PPI

We announced in September 2007 that we would seek to impose larger fines where appropriate to provide greater deterrence for poor sales practices in the retail market generally and the PPI market in particular.

We have fined eight firms over poor PPI selling practices:

• Liverpool Victoria Banking Services £840,000;
• Land of Leather Limited (£210,000 for the firm and £14,000 for its chief executive);
• HFC Bank £1.085 million;
• Regency Mortgage Corporation Limited £56,000;
• Loans.co.uk £455,000;
• Redcats (Brands) Limited £270,000;
• GE Capital Bank £610,000; and
• Capital One Bank (Europe) Plc £175,000.

We have also imposed a public censure on Eastern Western Motor Group Limited and Cathedral Motor Company Limited.

Further Information

PPI sold with credit – changes from 2010

Clarification of PPI page
Clarification of regular premium protection insurance price disclosure

Selling PPI?
Have a look at our factsheet. [PDF]

Consumer help
Moneymadeclear includes questions people should ask before taking out PPI.

Payment protection insurance (PPI) – dealing with claims