Banks and PPI – an opportunity for brokers?

Nigel Payne is managing director of Assurant Intermediary

So the banks lost their case on PPI mis-selling and are now setting aside billions of pounds for potential claims. Lloyds has set aside £3.2bn and Barclays £1bn. Even the Nationwide has set aside a relatively small £16m.

What this has done is started to open up opportunities for brokers to sell income protection or mortgage protection to clients who are no longer covered. Let’s be clear, not all PPI was mis-sold. Most of the regulatory focus was around products sold with credit cards and loans and not mortgages or straight income protection. However these products seem to have been swept up in the tsunami of claims.

The reality remains that a lot of clients still need some form of insurance protection should they have an accident, become sick or be made redundant. Protection products have changed in the last couple of years and brokers can sell and advise on these products with confidence.

The Consumer Insurance (Disclosure and Representations) Bill introduced by the government this month will radically change the relationship between consumers and insurance providers, and could result in the end of underwriting at point of claim for payment protection insurance (PPI). 

The bill shifts the emphasis away from a consumer’s duty to disclose all necessary information, to a requirement for insurers to ask particular questions and obtain specific information about their customers, before they issue an insurance policy. This shift in responsibility may result in a reduction in any arbitrary or subjective repudiations based on unintentional non-disclosure. 

At Assurant Intermediary we’ve been one step ahead of the curve on this shift from underwriting at point of claim to the point of sale. I’m glad to say we were among the first to move all our MPPI and Income Protection policies to being underwritten at the point of sale, giving clarity and confidence to brokers and their clients that all valid claims will be paid.

So the banks will proactively contact customers offering some form of refund and most customers are likely to take what they are offered. Critically that leaves them without the cover that many will need and they may be more willing to listen to advice on such a product. Not only that but they may need advice on what to do with a PPI refund that could run into thousands of pounds. Sounds like an opportunity to me!