Letter of the month

PPI problems spiral through not following basic principles

Following the recent Office of Fair Trading feedback session on payment protection insurance, Adrian Fowler of Assurant Solutions discussed how our industry is moving closer to delivering a sound product that represents a good deal for consumers.

He also commented on how it was good to see the session giving priority to providing customers with choice and value for money.

Is this not what we should be doing anyway? It is a shame players in the payment protection sector need the OFT to lead the way.

The insurance industry was built upon the cornerstones of robust underwriting, sound products, choice and value for money, so why are these principles not extended to payment protection.

I do not see the household or motor sectors under investigation from the Citizens Advice Bureau or OFT.

Our industry should never have got to the stage where it needs external intervention to ensure we offer a sound, fairly-priced payment protection product. And, while it is easy to point the finger at the retailers, the wholesalers need to shoulder their share of the blame.

Why have insurers allowed payment protection insurance claims ratios to continue at less than 20%, as opposed to 74% for motor and 55% household?

Profits, at the expense of the consumer, are huge in this sector - but then, given the high commission rates, profit sharing and bonus agreements, insurers will no doubt argue they need to be.

How did the PPI issue spiral out of control and why were those basic insurance principles not adopted?

It is unfair to put pressure on retailers and trade bodies to change perceptions and 'educate' consumers better, the wholesalers need to take a long hard look at how they have contributed to this situation.

Sara-Ann Burgess, Britishinsurance.com.