The FSA and Office of Fair Trading met last month with providers and advisers to debate short-term income protection final guidance. There were demands for the regulator to go further than simply highlighting PPI problems. Has the regulator done its job? Or does more need to be done to encourage healthy STIP sales?
Ellen Roome, owner, The Finance Roome
The big issue with PPI selling was that it was a forced purchase without being given time to think about a client’s actual need for PPI, or allowing them to research the market for the most suitable product. The ban on point-of-sale PPI sales was essential but in fact has proved good for both customers and advisers.
One of the main outcomes from the new FSA/OFT guidance is that “Firms should ensure that they treat actual and potential customers fairly and do not engage in unfair or improper business practices.”
To address this properly, our network Personal Touch introduced significant revisions to sales processes. They include compulsory oral disclosure checklists as part of the standard advice process for every affected sale, confirming that the adviser has made the key disclosures.
We now have a much more robust framework to ensure customers buy into, and understand, the need to protect themselves effectively against various unforeseen circumstances, such as accident or illness.
With the new system the adviser takes time to research and choose the most suitable from the range of available products – including STIP – to the customer’s needs, presents the findings and recommendations using plain English and then gives the client time to consider the advice before signing on the dotted line.
So as long as advisers continue to take care of their clients by utilising revised and improved sales processes when selling STIP they will continue to ensure clients’ needs are met and there should be no comeback.
Steve Devine, chairman, Protect
The FSA has regulated these PPI products since Jan 2005 and I am disappointed with this guidance; its tone, the way it has been conducted and the missed opportunity to use it to encourage the market to develop. And also ultimately, for consumers to take responsibility for their short-term protection needs.
The draft guidance was issued 26 Nov 2011 with a consultation period ending 13 Jan 2012. It was extremely short given it included Christmas holidays. The regulator’s stated intention was to publish final guidance in the first half of 2012 and also that it would publish information to consumers about payment protection products, including PPI.
The final guidance eventually arrived, without any reason for the delay, in Jan 2013. Despite the delay we never did find out what the regulator’s emerging concerns were such that publication kept being put back.
The guidance can be seen as a first glimpse into the new FCA product intervention regime and I suspect that this was partly the reason for the delay. It is also over-prescriptive and challenging in terms of underwriting, yet vague in terms of defining positive outcomes.
The development and growth of the STIP market has suffered in the prolonged time distributors and providers had to wait for this final guidance. There has been – and still is – a lack of confidence in the industry regarding STIP development and sales. I am not sure this guidance has provided sufficient stimulus for firms to introduce market affordable and effective STIP products.