The UK Financial Services Authority has revealed details of the next phase in its attempt to improve the sales standards in the payment protection insurance industry. The work will involve testing industry progress in ensuring that customers are being properly informed about the insurance option.
According to the Financial Services Authority (FSA), this phase will involve mystery shopping, as well as follow-up work with those firms previously found to have deficient practices, and visits to a number of firms that have not yet been reviewed.
In building upon its previous work on the matter in 2005 and 2006, the FSA intends to focus on those firms for which payment protection insurance (PPI) is a minor activity in relation to their main business.
This phase, which the FSA intends to complete by the end of June 2007, is designed to test industry progress in ensuring that customers are aware that PPI is optional, that they are properly informed about the product and what it includes and excludes, and that they know about the costs involved.
Clive Briault, FSA managing director of retail markets, said: Improving sales standards in the PPI market remains a key priority for us and we see it as an indicator of whether firms are treating their customers fairly.
He added, Customers should come away from the sale having been given the best possible chance of understanding that PPI is almost always optional, what the policy will and will not cover, and how much it costs. The next phase of our program will tell us what progress has been made and what further action is necessary.
The four main elements of the FSA’s program involve visits to firms, enforcement action where appropriate, information aimed at consumers, and a review of current FSA rules on PPI. The FSA has stated that it will publish its findings in the third quarter of 2007.
According to the regulator, around 10 firms have already been referred to enforcement and it will continue to take disciplinary action against firms that fail to meet appropriate standards.