IP will replace PPI - Defaqto

clock

Defaqto has said it believes short term income protection (IP) products are likely to become the replacement for payment protection insurance (PPI).

The market analyst has marked the industry trend by abandoning its star ratings for all PPI products except mortgage (MPPI) related plans and adding in a new category for short term IP.

Speaking at the Protect trade body meeting, Ben Heffer, market analyst at Defaqto, revealed that insurers and distributors had jumped ship from most PPI products, with a growth in short term IP taking place.

"There's a new trend coming through and that's the short term IP product," he said.

"The point of sale prohibition for PPI could be an impetus to create a standalone market for these short term IP products, to cover not only payments but people's life expenses too."

In 2009 there 20 short term IP products available, and according to Defaqto, that number has doubled.

This at a time when PPI products have been sharply reducing, with MPPI plans cut from almost 100 to around 75 now and personal loan and credit card PPI policies cut even more significantly.

Heffer acknowledged that the PPI name was now impossible to rehabilitate and the saga had unnecessarily damaged MPPI inparticular.

"Relatively few Financial Ombudsman Service (FOS) complaints apply to MPPI, which is a shame as it's been tarred with the same brush," he said.

"PPI is a toxic name, a toxic brand and we definitely need a new name for this. Short term IP appears to be where is this going, but unfortunately that probably confuses and blurs the lines between short term IP and long term IP.

"I'm not sure that's necessarily a good thing to do," he added.

Heffer concluded by warning that the continued price cutting trend could harm the industry and its reputation with consumers.

"The down pressure on price should be a concern to all of us. If cheaper products mean poorer products, that's bad for the consumer."

Kevin Carr, chief executive of the Protection Review, who spoke after Heffer, added his support to a replacement for PPI.

"The opportunity for something that sits in the middle between PPI and long term IP is quite clearly the future," he said.

More on Individual Protection

Highlights

FCA gives three-month Consumer Duty extension for advisers

FCA gives three-month Consumer Duty extension for advisers

Deadline of 31 July 2023

Hemma Visavadia
clock 27 July 2022 • 5 min read
Meet the firm turning professional athletes into protection advisers

Meet the firm turning professional athletes into protection advisers

"You're only ever as good as your last game, but your next game could be your last"

Hemma Visavadia
clock 25 July 2022 • 5 min read
The COVER Review July 2022: Protection & Financial Education, IPAW 2022 and Reviewing 2022 So Far

The COVER Review July 2022: Protection & Financial Education, IPAW 2022 and Reviewing 2022 So Far

Now available for members to watch

John Brazier
clock 20 July 2022 • 1 min read