The problems with Payment Protection Insurance have pushed providers towards alternatives but history could be about to repeat itself with the FSA and the Office of Fair Trading releasing a consultation paper on alternative PPI products earlier this month.

FSA managing director Margaret Cole said: “We are aware that some firms have developed new forms of protection that aim to meet similar consumer needs to PPI. These may, however, pose similar risks to consumer and the previous failings identified with PPI must not be repeated.”

Four main areas are identified as concerns:

• the policies may not meet customers’ real needs;
• payouts may not be sufficient
• firms are not properly identifying beneficiaries of alternative PPI
• policies may be too complex for customers to compare.

All these issues bear more than a passing resemblance to those raised with PPI. The alternative PPI market has grown this year. Both Aviva and Nationwide launched short-term income protection products to move into the gap left by companies such as Lloyds, which stopped offering traditional PPI in May following the British Bankers’ Association’s defeat in the High Court.

The BBA defeat is a good thing if it pushes providers towards replacing PPI with more worthwhile products but the products were not the problem before – it was the selling practices. Alternative products are open to abuse, but far less so than PPI

Aviva also does not believe alternative PPI bears any similarity with the original products. A spokesperson says: “Our short term income protection product has built on the lessons learned from PPI mis-selling. We have been heavily engaged with the FSA during the development of their approach to regulating alternatives.”

The Association of British Insurers agrees. “Lessons have been learned and sales standards are now significantly higher and more rigorously monitored. The FSA has made clear that all providers must have in place processes to ensure products reach the right customers, which reduces the risk of mis-selling,” says a spokesperson.

However, many industry insiders believe PPI is forever tainted by the mis-selling scandal, whatever form it is now packaged in. When you say to someone, ‘I have a plan for you in the event of your ill health’, they are now going to say, ’Not that PPI! The phrase PPI, alternative or not, is tainted.”

Fundamental problems with alternative PPI aside, the industry appears to be united on one issue – that an FSA consultation will have little impact on eliminating mis-selling.

Sally Bowyer, Managing Director of www.BrunelFranklin.com said, “Chasing a vendor can be a difficult and time consuming process to undertake with no support or technical knowledge, and this is where Brunel Franklin comes in. We would encourage anyone who believes they may have been mis-sold a PPI policy to talk to us, as a quick initial assessment is usually enough for us to decide if you have grounds for a refund.”

Learn more about PPI refunds and find out if you could apply for a refund today! Visit the website www.brunelfranklin.com or call Brunel Franklin, free, on 0800 051 54 51.