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Retail PPI - provisional findings

COMPETITION COMMISSION News Release (28/08) issued by COI News Distribution Service. 10 October 2008

The Competition Commission (CC) has today published its provisional findings report on retail Payment Protection Insurance (PPI).

Retail PPI is a small part1 of the overall PPI market relating to protection taken out on repayments for shopping through home catalogues. Although part of the ongoing investigation into the whole PPI market, the CC decided in June (when it published its provisional findings on the rest of the market) that it needed further information before reaching its provisional findings on this sector.

The report concludes that, as with other types of PPI policy, retail PPI is highly profitable for distributors and there is little competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products and a considerable point-of-sale advantage for the providers.

The CC has also published a Notice of Possible Remedies for retail PPI, inviting views on how best to remedy the problems identified. The notice includes most of the remedies consulted on for other types of PPI policies, as well as a possible requirement to sell retail PPI separately from merchandise cover.

The full provisional findings report on retail PPI and notice of possible remedies are both available at: http://www.competition-commission.org.uk.

The CC would like to hear from all interested parties about the documents by the following dates:

* Notice of Possible Remedies for retail PPI: 31 October 2008; and

* provisional findings on retail PPI: 10 November 2008.

To submit evidence, please email: PPI@cc.gsi.gov.uk or write to:
The Inquiry Secretary
(PPI investigation)
Competition Commission
Victoria House
Southampton Row
LONDON
WC1B 4AD

Notes for editors

1. The CC is an independent public body, which carries out investigations into mergers, markets and the regulated industries.

2. PPI covers repayments on credit products if the borrower is unable to do so due to loss of earnings as a result of accident, sickness, unemployment or (in many cases) death. PPI is sold to cover a variety of financial products, but over 90 per cent of PPI sold in the UK in 2006 was either: personal loan PPI, credit card PPI, mortgage PPI or second-charge mortgage PPI.

3. Enquiries should be directed to Rory Taylor on 020 7271 0242 or rory.taylor@cc.gsi.
gov.uk.

4. The members of the PPI inquiry group are Peter Davis (Group Chairman and CC Deputy Chairman), John Baillie, Christopher Bright, Professor John Cubbin and Richard Farrant.

5. The OFT referred the PPI market for investigation by the CC in February, following its initial study into the sector in response to a 'super-complaint' from Citizens Advice. Under the Enterprise Act 2002, the OFT can make a market investigation reference to the CC if it has reasonable grounds for suspecting that competition is not working effectively in that market.

6. Following such a reference, the CC carries out a comprehensive investigation, so that it can ultimately come to a final decision about whether any features of the market prevent, restrict or distort competition and, if so, what action might be taken to remedy these.

7. Market investigation references are intended to focus upon the function of a market as a whole rather than the conduct of a single firm in a market. If the OFT has concerns about the conduct of a single firm or firms that have engaged in anti-competitive agreements, it will first consider whether those actions infringe the Competition Act 1998.
1In 2007 the gross written premium (GWP) paid by customers for retail PPI was £73 million. In 2006 the GWP for all other forms of PPI was £4.5 billion.