Defaqto’s latest report, “Payment Protection Insurance - 2008  - The party’s over ” predicts that over the next two years there will be a  massive upheaval in the industry as lenders, underwriters and consumers are forced to adjust to consequences that will flow from the judgements of the Competition Commission.With an annual turnover of around £4.5bn and profits in the order of £1.5bn the industry is likely to suffer a severe dilution of profits when the Competition Commission’s statement of remedies is published. If this includes de-coupling the sale of PPI from that of the credit product, this in itself would have a huge impact on the industry. 

As a consequence of the inevitable tightening of the rules under which PPI can be sold, costs and charges across a wide range of other financial products and services will have to rise steeply if banks and credit card companies are to fill the holes in their balance sheets that this will create.

PPI products principally cover protection for loans, credit cards and mortgages but there are significant differences in the way the products are costed and sold. So, while the shortcomings of the PPI industry are well-documented, particularly in connection with the complexity of the products, the sale process itself, the sale to people not covered by the policy and the high cost of some plans, these findings do not apply universally.

PPI policies can and do provide a vital income stream to meet ongoing bills if accident, sickness or unemployment does strike and calls by newspapers and lobby groups to policyholders to cancel their policies could leave them seriously exposed if this advice were followed.

Commenting on the industry, Brian Brown, Head of Insight and lead author of the report said: “We must be very careful not to throw the baby out with the bathwater. PPI has been exploited by lenders as an easy source of profit, but the products themselves can be an extremely valuable.

Policyholders need to carefully examine their personal circumstances and their policy wordings and form a judgement as to whether to retain them, seek cheaper alternatives or drop them altogether.

PPI is the first safety net people fall back on before being forced to claim state benefits and PPI’s detractors should think carefully before advising people to cancel their policies unless they are prepared to accept responsibility for policyholders left unprotected by their advice.”

-Ends-

Notes to Editors:

¹The report “Payment Protection Insurance - 2008  - The party’s over ” is on sale priced £1,200 excluding VAT for a PDF version and £595 (No VAT payable) for a single printed copy. For further information please contact Chris Johnston on 01844 295457, or the Sales Department on Freephone 0808 1000 804 or visit http://www.defaqto.com/

 For further information contact:

Defaqto Limited 

Brian Brown, Chris Johnston or Luci Mylward

01844 295 454

In its new report into the Pet Insurance Market [1], Defaqto raises the concern that the rate of provider churn could have a detrimental effect on the market unless adequate arrangements are put in place to protect existing policyholders.

Defaqto has identified six companies that have left the market in the last year and nine that have joined, a churn rate of 20%. Unless those pulling out of the market have put in place adequate transition arrangements to ensure that their customers’ pets can remain on cover without having to be re-insured, public confidence in the market could be weakened.

Underlying the churn rate is the fact that the market remains relatively small in absolute terms with premium Income totalling around £400 million per year. (more…)

Anyone tempted to buy a pet or who received one for Christmas should not forget that a key part of having a cat or dog is making sure it can be properly looked after when it is ill, says Defaqto in its most recent report, Pet Insurance in the UK 2007.[1]New owners need to look beyond the immediate pleasure of having a pet to what can happen to it over its life. Not only are the costs of treating pets rising, but just as with humans, new treatments are being introduced all the time to improve a pet’s quality of life when it is unwell. 

Although there are over 120 policies examined in the report, they fall into two main types: those paying claims only for the first twelve months of an illness only and those that will pay for the whole time the pet needs treatment for that condition, but with a limit on the expenditure each year.

(more…)