The consultation paper, designed to aid the decision-making on remedies for the PPI market due in December, found those parties for single-premium policies felt it was more efficient than regular-premium structure because of the profile of the risk on a policy over the life of that policy.
The CC, which suggested scrapping single-premium policies as one potential remedy, says the most logical response was to charge a single premium and provide a rebate for the unexpired cover upon termination for that same reason.
However, the rebate structure for single-premium policies was described by opposing parties as “non-linear” because of the uneven risk profile and because those terminating the policy earlier would receive greater cover than those holding the policy for longer.
According to the CC: “The only way to reduce the impact of this, we were told, would be to reduce the benefits on offer to try and flatten the risk profile to make it more like a pro-rata rebate profile.”
A pro-rata rebate, however, would mean an increase in cost for some parties, in a similar way to switching from single-premium to regular-premium.
The same paper found that if the CC imposed remedies to lower PPI prices, credit prices would rise or credit acceptance cut-off scores would rise, contradicting the point that lower credit prices were a relevant customer benefit.
The CC is now urging any persons wishing to share their views to submit evidence by October 28.