Brian Lindley explores the PPI marketplace, consumer attitudes and what may help regain their trust
It would be difficult to deny that the payment protection insurance (PPI) market has been the victim of some negative reports in the media over the last 12 months, despite economic conditions which make protecting against unemployment more relevant than ever. However, it may be the case that 2011 is a pivotal year for PPI.
A large part of the negativity may not be completely justified as according to a recent industry survey, about 30% of respondents believe PPI is still a worthwhile scheme and an integral part of their decision-making process when it comes
to ascertaining personal finance liabilities and the associated risks.
Following this negative period in the market, regulators such as the FSA and the Competition Commission have published policy statements and draft orders to remedy the PPI market. This has been done with the best intentions, but not all of it has been well received by the industry.
Coupled with the media coverage, it has meant many firms now offer no protection with financial products and may decide not to re-enter the market, thus reducing the number of suitable products available for consumers. With very few firms offering cover during the sales or cancellation cycle, this could leave many customers unprotected.
The rates of customers complaining about the sales process and suitability for cover are still rising. There is little doubt this can be attributed to large-scale advertising and public awareness campaigns by consumer champions and claims management companies.
We have seen in the media and heard from within the sector that there has also been a dramatic reduction in firms providing relevant and timely advice to consumers because of the legacy and market conditions of PPI.
The result is that both the industry and customers may perceive that irreparable damage has been caused. But where does that leave the consumer today and in the future?
Repairing a stained image
Before speculating on the PPI market's future, it is worth noting firstly that the history of mis-selling should be acknowledged across the industry. We cannot, and should not, ignore those customers who can detail very bad experiences. However, as will be explored, under this surface there exists enormous potential to provide a valuable product.
The key to invigorating this market may lie in providing much needed timely and relevant advice, and empowering customers to choose the product that is right for them. This is vital to their decision-making process.
At a time when cuts are being made, household budgets are squeezed and the worry of not being able to keep up with numerous repayments is widespread across the UK, it seems a foregone conclusion that replacement products will need to be driven by the customer's requirements rather than the industry.
The market has a responsibility to ensure customers are adequately protected and that, in future, consumers are offered a wider choice of products that suit their needs.
There is also a large proportion of customers who believe there would be a place for the right product if the cost of protection was more competitive and accessible.
At the end of 2010, a Capita survey (above) into people's experiences and perceptions of PPI revealed a positive outlook for a protection product, coupled with the right advice and the right cost.
It is encouraging that some organisations are indeed investing and focusing on developing new products, such as income replacement, which is a more flexible offering and would protect the claimant's income. This is undoubtedly a positive step as long as they benefit the customer.
