Bloomberg News

Retail-Loan Insurance Shouldn't Be Sold With Loans, Agency Says

November 21, 2008

Retail payment-protection insurance, which had premiums totaling 73 million pounds ($109 million) last year, shouldn't be sold at the same time as underlying loans, a British antitrust regulator said today.

The Competition Commission stopped short of proposing a price cap or ban on PPI, which it says is sold without giving customers enough information. PPI is sold to debtors to cover loan payments in case of illness or unemployment. Retail PPI covers loans used for home catalog shopping. The commission has been investigating PPI for almost two years.

The overall PPI market generates annual revenue of 5.5 billion pounds and has come under scrutiny from other U.K. regulators. The Financial Services Authority fined Alliance & Leicester Plc a record 7 million pounds last month for not advising customers of the true cost of the product.

``Retail PPI is highly profitable for distributors and there is little competition between providers on price and other factors, limited ability for customers to search for alternatives or switch products,'' the commission in London said in a statement today.

Today's proposals to make retail PPI more competitive supplement remedies the commission suggested a week ago for the rest of the PPI market.

The proposal to ban the sale of retail PPI with the underlying loan matches a proposal last week. Still, the commission didn't suggest prohibiting single-premium payments, where payment of PPI and the loan is bundled, as it did for the rest of the PPI market. That's because all retail PPI is covered by monthly premiums and bundling doesn't happen, the agency said.

The commission also said today there should be a 14-day period after the sale of a loan before customers could be contacted about buying retail PPI. It also said that distributors should state clearly in advertisements that PPI is voluntary and how much it costs each month.

To contact the reporter on this story: Caroline Binham in London at

To contact the editor responsible for this story: Anthony Aarons at

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