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Consumers 'overcharged by £1.4bn'
The Competition Commission wants customers to shop around
People buying Payment Protection Insurance (PPI) are being overcharged by £1.4bn a year, the Competition Commission has found.
It said the overcharging was down to a lack of competition because PPI was sold along with the loans it protected.
The commission suggests that firms may be banned from selling PPI policies to customers when they take out loans.
PPI is insurance for loan repayments if someone loses their income due to ill health or unemployment.
Lack of competition
The commission also said it was considering imposing temporary price limits on the policies, until competition brings their prices down.
Peter Davis, the commission's deputy chairman, said there were serious problems with the sale of PPI polices, with a lack of competition among providers leading to high prices.
"The way PPI is sold as an 'add-on' to a loan or other credit product means distributors escape the pressure they should face from competing suppliers," he said.
"Distributors don't appear to compete much with each other on either price or quality of PPI; neither do they appear to do much direct advertising of PPI to win customers from each other," he added.
"Protection racket"
The sale of PPI polices has come under severe attack in the past three years.
The consumers organisation Which? has described their sale as a "protection racket".
And the main financial regulator, the Financial Services Authority has fined numerous banks, insurance companies and brokers for mis-selling the insurance.
The Competition Commission has been investigating PPI after being asked to do so by the Office of Fair Trading.
It in turn was responding to a "super-complaint" by Which? lodged in September 2005.
Last week the Financial Ombudsman Service reported that it had seen a surge in complaints about the mis-selling of PPI in the first few months of the year, due to media and internet campaigns against the policies.
The Competition Commission wants customers to shop aroundPeople buying Payment Protection Insurance (PPI) are being overcharged by £1.4bn a year, the Competition Commission has found.
It said the overcharging was down to a lack of competition because PPI was sold along with the loans it protected.
The commission suggests that firms may be banned from selling PPI policies to customers when they take out loans.
PPI is insurance for loan repayments if someone loses their income due to ill health or unemployment.
Lack of competition
The commission also said it was considering imposing temporary price limits on the policies, until competition brings their prices down.
Peter Davis, the commission's deputy chairman, said there were serious problems with the sale of PPI polices, with a lack of competition among providers leading to high prices.
"The way PPI is sold as an 'add-on' to a loan or other credit product means distributors escape the pressure they should face from competing suppliers," he said.
"Distributors don't appear to compete much with each other on either price or quality of PPI; neither do they appear to do much direct advertising of PPI to win customers from each other," he added.
"Protection racket"
The sale of PPI polices has come under severe attack in the past three years.
The consumers organisation Which? has described their sale as a "protection racket".
And the main financial regulator, the Financial Services Authority has fined numerous banks, insurance companies and brokers for mis-selling the insurance.
The Competition Commission has been investigating PPI after being asked to do so by the Office of Fair Trading.
It in turn was responding to a "super-complaint" by Which? lodged in September 2005.
Last week the Financial Ombudsman Service reported that it had seen a surge in complaints about the mis-selling of PPI in the first few months of the year, due to media and internet campaigns against the policies.
