The Office of Fair Trading has referred the UK payment protection insurance market to the Competition Commission.
It has slammed excessive commissions in the sector and has published its analysis of the market for a consultation process that ends on November 30, ahead of a decision early next year on the future of the sector.
The OFT has found evidence that consumers do not shop around for the best deal on PPI, that the complex nature of PPI makes comparison between different policies difficult, and consumers in some cases assumed, or were told or given the impression that taking out the PPI would help the application for credit.
The evidence also shows that PPI has low claims ratios when compared to other insurance products and, with no evidence to suggest costs are high, the OFT says it seems reasonable to assume that distributor profitability is sizeable, partly because of high commissions compared with other general insurance products.
The news comes after the Financial Services authority today slammed continued poor practice following its market study.
OFT chief executive John Fingleton says: “Following the work we have undertaken it is clear that many consumers are failed by PPI. There is limited evidence the industry is taking steps to improve the situation, but we believe they will not make major improvements to competition in the market.
“Given our evidence and the scale of this market, our provisional view is that it would be appropriate for the Competition Commission to investigate further.”