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Last Updated: Monday, 3 April 2006, 11:08 GMT 12:08 UK
Probe begins into debt insurance
Credit card
Payment protection insurance is available on credit cards and loans
An investigation into the 5bn payment protection insurance (PPI) market has been launched.

In a wide ranging probe, the Office for Fair Trading (OFT) will look at whether PPI providers are making excessive profits and treating customers fairly.

The OFT will also examine how hard it is for consumers to find product information and claim on PPI policies.

PPI is designed to help people repay loans, mortgages or credit card debt if they fall ill or lose their jobs.

The decision follows a so-called super complaint, made last September, from Citizens Advice that PPI was too expensive and was often sold to people who did not need it.

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It said policies offered by mainstream lenders often excluded cover for common problems such as bad backs and mental illness.

Many policies also had arbitrary age limits or banned people who were self-employed or on fixed-term contracts from making a claim.

Areas under investigation

Under consumer law, the OFT is duty bound to investigate super complaints made by Citizens Advice, Which?, the National Consumer Council and Energywatch.

During the course of its investigation, the OFT said it would look at the following areas of the PPI market:

  • Whether the profit margin on PPI policies are high
  • Do high set-up costs stop stand-alone PPI providers from entering the market
  • Whether consumers are find it difficult to get information on alternative providers from their lender
  • The experience of policyholders when making a claim against their PPI policy
  • The impact on consumers of policy exclusions

The OFT said it would publish its findings before the end of 2006.

The OFT will consult widely with the industry - a business survey will be sent out shortly to lenders and intermediaries - and a detailed survey of consumers will also be carried out.

If necessary, the OFT can refer the insurance industry to the Competition Commission for enforcement action.


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