The call comes in the ABI’s response to the commission’s PPI draft order, which proposes a ban on single-premium policies, a ban on point-of-sale policies and an obligation to provide a quote, clear marketing material and the ratio of claims paid.
The ABI says that short-term IP should be excluded from the order when the policy terms contain no standard pre-existing medical condition exclusion clause, when the benefits are paid directly to the policyholder and not a third-party loan provider and when the policy benefits are not directly linked to any credit terms.
It argues that, as part of the information PPI providers would be required to send consumers annually, they should highlight the risks associated with switching between policies, such as the danger there could be a gap in unemployment cover or difficulty getting a new policy where circumstances have changed.
ABI assistant director of health and protection Nick Kirwan says: “We understand the risks and the reasons why short-term income protection was initially included in the scope of the draft order but to support competition in the market it is essential that it is only included where there is a specific need to protect the interest of consumers and not, for example, where it is taken out on a standalone basis by consumers who are shopping around.”
Kirwan says that the current definition of short-term income protection in the draft order is “ambiguous”, suggesting it should be policies that include cover for accident, sickness and unemployment as opposed to any one or more of these events.
Highclere Financial Services partner Alan Lakey says: “It would be a shame if a product like short-term IP is affected due to the fact it falls under this toxic name.”