SPECIAL FEATURE: Rule change on PPI offers opportunity

Robyn Hall

May 4, 2012

The final phase of the Competition Commission Order on the sale of payment protection insurance came into effect last month on 6th April.

It included the primary change to the sales process itself – the seven day prohibition of the sale of PPI which includes mortgage payment protection.

This new rule effectively de-links the sale of these types of insurance covers from the credit product and applies an exclusion period.

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The ban means that consumers who actively seek out PPI to protect their mortgage repayments or other financial outgoings will have to shop around.

I believe this creates a strong market opportunity for intermediaries to service that need.

Intermediaries are best placed to offer advice on the appropriateness of products like MPPI, short-term income protection or a combination of covers and their suitability.

Their expertise provides them with a real opportunity to gain competitive advantage in the new marketplace and help protect and serve their clients at the same time.

So one month in to the new world, how are intermediaries faring?

Compliance issue

Assurant Intermediary is getting a mixed bag of views from around the country. Some appear to be well geared up to manage the new sales environment but a significant number are telling us that they are still confused as to what they can or cannot do.

The main issue appears to be that while there is a lot of information available regarding the new requirements, there isn’t a simple outline or guide for intermediaries to refer to so they can ensure their sales process is compliant.

The Competition Commission has created a simple graphic which clearly sets out when a consumer can return to buy PPI or MPPI and when the provider or intermediary can contact the consumer to sell when, a personal PPI or MPPI quote is provided during the credit sale.

It has created another outlining when a consumer can return to buy PPI or MPPI and when the provider or intermediary can contact the consumer to sell PPI or MPPI following the credit sale.

These can be downloaded from our website and I would recommend that intermediaries keep a copy to hand until they are completely familiar with the new guidelines.

Protection products such as MPPI have provided a lifeline for many consumers especially during the recent economic downturn.

It is also worth remembering that throughout the Competition Commission investigation and previous thematic reviews by the Financial Services Authority, MPPI received a pretty clean bill of health.

It would be wrong of intermediaries and distributors to deny their clients the opportunity to purchase this valuable cover if it is suitable for them, because of changes introduced by the Competition Commission.

Basic requirements for selling MPPI

Intermediaries who are a member of a network should check as they may have their own specific compliance procedures.

1. The prohibition applies to distributors and intermediaries that arrange credit such as a mortgage for a consumer from selling PPI or contacting the consumer regarding PPI during the credit sale and for seven days after either the conclusion of the credit sale or the provision of a personal PPI quote if this occurs after the credit sale.

2. There is a limited exemption enabling a consumer to buy PPI over the internet or by telephone 24 hours after the credit sale provided that the consumer has initiated the transaction.

3. There are no restrictions on the sale of PPI seven days or more after the end of the credit sale period by any party covered by the prohibition period but the party – e.g. the intermediary – must obtain confirmation that the consumer has seen the personal PPI quote before any PPI sale can be made.

4. The Competition Commission defines a credit sale as starting with a consumer’s application for credit and lasting until the consumer is provided with confirmation of the credit sale – e.g. the mortgage offer – in writing.

5. When a mortgage is being sold, intermediaries can provide an MPPI quote to consumers at any time however it can’t be sold until seven days after the later of these two events – either the date the lender formerly makes the mortgage offer or the date the intermediary provides the consumer with an MPPI quote.

6. Either PPI or MPPI cannot be pre-sold by the provider or intermediary before concluding the sale of credit.

7. Either PPI or MPPI cannot be included in the agreement for the credit that the PPI is sold to protect.

8. A personal PPI or MPPI quote must be provided if the intermediary gives any information about PPI or MPPI after the credit sale and the prohibition period starts from the date on which the quote is provided to the consumer.

9. The consumer can buy PPI or MPPI from any other provider during the credit sale and during the prohibition period – so standalone sales are permitted at any time.

10. PPI or MPPI sales made six months or more after the credit sale are treated as standalone sales and not subject to the prohibition in the implementation of the point of sale ban.

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