Although the OFT says the market study is not examining “one particular sector”, PPI within the automotive F&I market is certain to be scrutinized with roughly 14% of UK loans going into buying cars.
While sales processes, tightened up under FSA regulations, are unlikely to be a major issue, areas of concern highlighted by the OFT after a super-complaint from Citizens Advice include possible excessive premiums and high profitability tied to relatively low claims ratios.
An F&I pundit warns: “It is down to whether or not premiums are deemed high relative to payouts and the consequences of that could be charging lower premiums or making higher payouts. Either way F&I, especially credit insurance, remains a core profit source for retailers so the industry is concerned changes and reduced margins might result.”
Figures from 2003 show that overall PPI claims ran between 15% and 20% against 74% for motor insurance.