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OFT finds low claims fuel huge PPI profits

The Office of Fair Trading has slammed the payment protection insurance market after finding providers are making massive profits on the back of low claim ratios.

It has led to calls for the FSA to delink loans and PPI so stand-alone providers of PPI can compete, driving down prices and giving brokers a foothold. The OFT says PPI has one of the lowest claim ratios of any insurance at just 17 per cent.

British Insurance managing director Simon Burgess says the report is likely to be referred to the Competition Commission and he expects providers will be forced to delink loans and PPI, which could provide opportunities for brokers. He says: “If the products were unbundled, it would kill off a huge cash cow for these providers and they would stand to lose out on a lot of money. It would be great news for brokers.”

British Insurance Brokers’ Association technical services manager Graeme Trudgill says: “We do not like the way that single-premium payment protection is sold by the banks. The money they are making on it is huge. The market needs to be opened up.”

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