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End of PPI reign could prompt IP innovation

The recent PPI changes have left the protection market in a fortunate position, according to some industry experts.

Following the Competition Commission’s PPI changes last week, including banning the sale of PPI when arranging credit and for seven days thereafter and for all PPI distributors to provide a personal PPI quote and annual statement, Munich Re’s head of marketing Andy Milburn says there is now scope to design a ‘hybrid product’ more suited to the consumer.

He says: “Given the Competition Commission review has effectively put an end to the PPI market in its current form from March 2010, the challenge for the protection industry is to design a new ‘hybrid’ income protection product supported by a TCF compliant sales process that fits the needs of consumers who buy PPI products.”
Milburn is now describing this moment as a “golden opportunity “ which protection providers who offer IP products should grasp. He says: “This sort of chance to take the existing IP market forward rarely occurs and the window will not remain open for long.”

Pru Protect director of protection development Kevin Carr agrees. He says: “It is a great opportunity and I think the IP industry is long overdue a complete makeover. We need to go back to the start and build a product that not only meets real consumer needs but is easier to buy. We need to rethink the application process, the underwriting rules, the pricing and product design from scratch taking the existing benefits of both IP and PPI to deliver something better than the sum of its parts.

“In truth, when it comes to IP some providers have been steadying the ship just when the boat needing rocking.”
CBK Colchester principal Peter Chadborn says while PPI policies have many exclusions and are far from flexible, it might be worth introducing the simplicity of the PPI application into the IP market.

He says: “The simplicity of the PPI application process is a factor which contributes to the fact that PPI sales outweigh IP to the extent that they do. The ease of the process has got to be something which IP providers can learn from.”

However, Bright Grey’s head of product proposition Ian Smart says providers must “be very careful in taking advantage of this opportunity”. He says: “As part of the Competition Commission investigation into PPI they concluded that other products that share similar characteristics should be classed as PPI. As a result of this they have potentially caught other more traditional income protection policies where the benefits are paid only for a limited period. We are therefore looking at this carefully as even plans that have never been marketed as PPI are potentially caught. This sort of issue needs to be clarified before we start looking at new product designs.”

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