ABI concerned PPI market may collapse if suggested proposals go ahead
The Association of British Insurers (ABI) has been criticised over its response to the Competition Commission's stance on payment protection insurance (PPI).
Reacting to the commission's ban on selling the controversial product, the ABI released a statement that said it acknowledged the problems in the PPI market but expressed concern it could be destroyed by the proposed solutions, especially in the wake of the current credit crunch.
Matt Morris, policy adviser at LifeSearch, said he was unsurprised the ABI was willing to defend PPI and the situation was "unfortunate".
Jonathan French, spokesperson for the ABI, responded by saying the ABI had no problem with the PPI product itself but took issue with the sales processes used.
He said: "When sold correctly, PPI is a perfectly good product. Everyone is doing their bit to try and improve the situation."
He added: "It is not the product which is seriously being criticised, it is the way it has been sold and everyone involved in the process has a responsibility to try to improve things. That is what they are trying to do."
He went on to accuse critics of the ABI as "disingenuously failing to interpret" what the ABI and others in the industry were saying about PPI.
Alan Lakey, principal of Highclere Financial Services, said: "I do find it worrying that the ABI seems to take a conciliatory view. While they accept there have been individual problems, they are trying to defend PPI at the same time. It is finding itself in an invidious position."
Lakey added: "I would like the ABI to turn around and say these products can be poisonous and need to be looked into. That's what I'd like to see but I won't see it."
Roy McLoughlin, senior partner at Master Adviser, said the ABI should choose to publish the differences between products: "Income protection (IP) sits at the top table of the protection hierarchy and it is vital the adviser community is educated as to why this is so. Mis-sold PPI does not deserve to be in the same banqueting hall."
He added: "It is the responsibility of the ABI to point out the product currently being crucified by the Competition Commission is of such an inferior nature to IP that to even put them in the same sentence could be misleading."
Roger Edwards, product director at Bright Grey, raised concerns that the ABI had abandoned IP reform because of concern over the Competition Act. He added these had been circumvented for critical illness and total and permanent disability products.
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