UK - Regulatory and Legislative Developments – September, 2009

PAYMENT PROTECTION INSURANCE: COMPETITION COMMISSION CONSULTS ON DRAFT ORDER TO IMPLEMENT REMEDIES
 
The Competition Commission ("CC") has announced that it has published a draft order for consultation setting out how measures to introduce competition into the Payment Protection Insurance ("PPI") market will be implemented. The measures were outlined when the CC published its final report into PPI in January this year, concluding that businesses that offer PPI alongside credit face little or no competition when selling PPI to their credit customers. To address the lack of competition, the CC announced its intention to introduce a package of measures to bring competition in the market including:
 
  • a prohibition on the sale of PPI during the sale of the credit product and for seven days afterwards
  • a prohibition on single-premium policies
  • personal PPI quotes, annual reviews and other measures to make sure that improved information is available to consumers to make it easier for them to compare and search for products and switch policies at a later point.
 
Although the CC’s decision and proposed measures have since been appealed to the Competition Appeal Tribunal ("CAT") by Barclays, the CC says that it has started consultation on the detailed implementation of the changes to enable it to move quickly once the appeal is finalised and it has considered the CAT’s judgment. The appeal hearing takes place from 7-10 September.
 
 
 
"VISION FOR THE INSURANCE INDUSTRY IN 2020": IIWG REPORT
 
The Insurance Industry Working Group ("IIWG") was asked by the Chancellor of the Exchequer to consider ways of enhancing the role of the UK insurance industry in view of the medium to long-term challenges and opportunities facing the sector. HM Treasury has now published the report of the IIWG in which the IIWG has agreed a vision for the insurance industry in 2020. It wants the UK to be "the leading global insurance centre with an unsurpassed reputation for excellence, a deep and constructive relationship with its customers and a close and effective partnership with the Government". The report sets out recommendations which are
designed to achieve the following:
 
  • establishing a more customer-focused approach to increase customers’ confidence and trust in the insurance industry, and a greater awareness of their own personal responsibility
  • offering a broad choice of risk management solutions, which are competitively priced and provide customers with the products they need
  • acting in partnership with the Government to explore options to increase savings and protection provision and to help consumers manage financial distress in their daily lives caused by accidents, ill-health or old age
  • encouraging capital flows into the UK insurance industry by ensuring its competitive position in the global marketplace is maintained and enhanced, and that capital can earn a competitive return.
 
 
 
PAYMENT PROTECTION INSURANCE: ADVICE TO CLAIMS MANAGEMENT BUSINESSES REFERRING PPI DISPUTES TO THE FOS
 
In April 2009 the Financial Ombudsman Service ("FOS") published a letter to claims management businesses who refer to the FOS complaints about Payment Protection Insurance ("PPI") asking for assistance to help ensure all cases referred to them are handled fairly and as efficiently as possible, which in some cases, would mean a change of approach by claims management businesses.
 
The Ministry of Justice’s ("MoJ") Claims Management Regulation Monitoring and Compliance Unit has issued a letter to some businesses known to operate in this particular sector, and has now published the letter as a guide to businesses acting on behalf of consumers who may have been mis-sold PPI. The letter further details areas where businesses may need to review their practices and warns that failing to meet these requirements may constitute a breach of the MoJ’s Conduct of Authorised Persons Rules 2007. These Rules, which apply to the conduct of regulated claims management services from the date of authorisation by the MoJ of a claims management firm, require claims management firms to act responsibly and ensure that the service they provide meets clients' needs.