Some have hailed the decision as a way of reviving confidence in the IFA sector but others are worried the CC has gone too far.
Unleash Advice Partnership IFA Adrian Kidd says: “I love the idea as I think it will stop unscrupulous brokers saying ‘you need insurance to get the loan’, when the insurance can add £5,000 to the total cost.”
Likewise, Highclere Financial Services partner Alan Lakey says this is welcome news because PPI plans are “overpriced, oversold, overstated and generally quite inadequate given that cheaper and more effective plans are available”.
For Pioneer chief executive Andy Chapman the news brings with it the prospect of more income protection sales.
Chapman says: “Rather than a negative, I’d like to think this is an opportunity for intermediaries and providers to boost IP sales, in turn offering more protection to many more of the UK population.
“Although there is a danger that we suffer from the negative association to the PPI arena, it is within our control to communicate the positive messages we do have. For example, I believe that we have a great tale to tell on claims, one that has the potential to reassure and convince customers, so let’s be positive about telling it.”
However, Lifesearch policy adviser Matt Morris says while the CC is right to recognise that the “status quo is indefensible”, the danger is that banning point of sale PPI could result in fewer consumers taking out any protection whatsoever.
He says: “They need to look at a possible middle ground in which bank distribution is maintained. We don’t want to see this ban leaving people unprotected, what we want is for banks to be able to sell protection. With that, goes the necessity to tell consumers about the limitations of that product and how the alternatives compare. This would end the dodgy mis-selling practices which are at the heart of the problem.
“In short it is good that the CC is taking action, but we would have preferred a different approach, as outlined above.”
The Income Protection Task Force co-chairman Peter Le Beau says now is the time for the industry to present a “non-toxic” replacement to cover those unprotected loans.
He says: “It doesn’t require much foresight to anticipate that this announcement could be a mortal blow to PPI sales. While some loans may be unprotected, the industry needs to grasp the nettle and present an alternative, simple and non-toxic form of income replacement which will do a much more comprehensive job than PPI and at a lower cost and in a more ethical way. It will be a missed opportunity if we don’t find a better way to help people.”