Answer to protection gap not product specific - ABI

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Short-term income protection is only part of the answer to the protection gap, the ABI has said.

According to Awhina Fleming, policy adviser at the ABI, speaking in the context of the protection gap as a whole, there was a huge gap left behind by PPI but the solution was not product specific.

She said, speaking at the Protect conference this morning: "It should not be just about one product. How consumers protection needs are met needs to be a focus. STIP is part of the picture but we have to think more holistically. It is not just about one product."

Fellow speaker Ben Heffer, insight analyst for life and protection at Defaqto, said there was a definite increase in STIP products and it was a simple product that answered basic consumer needs.

He added: "We have something now to offer customers something which is different to PPI. It does not have to be linked to a particular mortgage and it needs to be bought rather than sold."

According to Defaqto, STIP products available in the market had risen from 20 to 66 between 2009 and 2012. But there were no figures available to show number of policies sold.

Norman Shuker, managing director at Protection Products, said: "There may be higher numbers of products available but I think STIP will be a total and utter disaster and it will not be bought at all.

"The FSA has made a massive mistake by killing PPI as a product. It was not the product that was a problem it was the mis-selling and market abuse."

The Competition Commission concluded in its 2008 report that the problem with PPI was lack of competition among distributors.

Heffer said the growth in websites offering STIP, making up 44 per cent of distributors, offered the stand alone answer to the CC's conclusions.

He added: "Will the STIP market grow and prosper given its resemblance to PPI? Most of the complaints are about mis-selling not about the PPI product itself."

Heffer said the incoming FSA regulation on STIP would clarify where it stood on the matter.

The FSA is due to publish a paper on STIP in the summer.

Alan Newman, psychologist at The Finance IT Network consultancy firm INV8, said the short-term product was a positive development.

"The overwhelming evidence shows that anything long-term means consumers just will not choose it. They have more things to manage in life so we need something short-term," he explained.

"Human behaviour does not change. STIP will be a reasonable product but take up will not be the same as it was for PPI."

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