The Financial Services Authority is embarking on its largest project towards tackling payment protection insurance (PPI) sales standards.

It will include mystery shopping and a programme of both follow-up work with firms whose practices were earlier identified as deficient and visits to a sample of firms not previously visited.

A particular focus will be on firms for whom the sale of PPI is a minor activity relative to their main business.

The FSA is not convinced that its current rules relating to PPI are delivering the protections that customers deserve and intends to see if there is a case for changes to some of the existing rules or the introduction of new rules.

Clive Briault, FSA managing director of retail markets, said: "Improving sales standards in the PPI market remains a key priority for us and we see it as an indicator of whether firms are treating their customers fairly.

“Customers should come away from the sale having been given the best possible chance of understanding that PPI is almost always optional, what the policy will and will not cover, and how much it costs. The next phase of our programme will tell us what progress has been made and what further action is necessary."

The next phase, to be completed by the end of June 2007, is designed to test industry progress on ensuring that customers:

are told that PPI is optional, where this is the case;

receive clear information about the product and what it will cost;

are given the assistance they need to be clear about what they are eligible for under the policy and what the exclusions are;

are, where advice is given, recommended a policy that meets their needs; and

are offered a fair refund if they cancel their policy.

The four main elements of the programme involve visits to firms, enforcement action where appropriate, information aimed at consumers, and a review of current FSA rules on PPI. By the end of June the FSA will have visited over 200 PPI firms in two years. Around 10 firms have so far been referred to enforcement.