There are a number of factors that have converged to create the sea-change we are now experiencing in the PPI sector. Investigations by the Office of Fair Trading and the Competition Commission have shaken up providers and distributors which remain under close supervision from ongoing work by the FSA.
This has led to a significant improvement in the terms of many of the policies now available, although the disparity between the best and worst in the market remains significant. In turn, this means that getting good advice is incredibly important if consumers are to find a policy that will do the job they need at a price they can afford.
The regulatory overhaul the PPI market is going through has also had a dramatic impact on the level of activity from both primary and secondary distributors. Many banks and building societies have pared back their efforts and are waiting until a more settled climate emerges before they resume what might be called normal service.
This is true also in secondary markets such as motor sales, where PPI products were typically sold as part of the finance package. This sector has been hit particularly hard and bears little resemblance to its former self.
Even many of the established insurers have become wary of the rising tide of unemployment and feel the risk is no longer one they want to underwrite. Some have withdrawn products, and the number of carriers offering PPI cover has fallen significantly.
Current product availability is the poorest it has been for the last 10 to 15 years and this is why it is imperative for people seeking out protection to get good advice.
The number of products available and the channels through which they are sold have nosedived while at the same time there has been a growing demand for PPI.
News of the recession has made for grim reading and there is no doubt that unemployment is a threat for many people. The worry is not so much that people may lose their jobs but that, if they do, it will be difficult to find work.
Concerns over unemployment have created an upsurge in the number of people taking out PPI and rarely has the issue been higher on the public agenda. People are discussing their options and weighing up the risks. It is this need for knowledge and expert guidance that IFAs can provide.
Traditionally, IFAs have seen PPI as a poor relation in the suite of products they could sell to clients and many have bemoaned the poor value and limited remit it seemed to offer. However, the regulatory changes that have swept through the market in recent months and years have helped raise the bar and the best products in the market now offer better terms than ever.
PPI is not an all-encompassing protection product but the role it can play as part of an overall strategy is very important. There has been a move away from PPI products linked solely to the mortgage, credit card or loan debt they cover, towards standalone policies that can cover a wider range of outgoings.
There is an increasing need to protect a lifestyle rather than a single payment and people want to know that if they suffer through accident, sickness or unemployment, they have cover in place to get them through difficult times.
PPI can be used within an overall strategy so it is ideally placed to allow advisers to get back in touch with existing client banks and offer it to them as part of a fuller review or alongside other products they are considering.
Many advisers have already looked to help clients in this area and meet the increasing demand but there is certainly scope for more advisers to position PPI as a central product in their portfolio.
The shake-up in the PPI market has created a new breed of products that are sharper and more flexible than their predecessors. This gives IFAs better options for their clients and, in a sector where price and product differentials remain significant, their professional advice has real value.
The changing times have brought improvements for consumers and advisers – the question now is whether they are able to take advantage of it.