August 2, 2016

Let’s face it, consumer spending is about the only thing that’s holding up the world economy. If people only bought the things they need, the whole edifice would quickly collapse under its own weight. Even people buying things they need and things they want isn’t always enough. That’s why it’s so important we make sure people are also buying things they neither need nor want.

PPI was a classic example. Someone might have hinted that your application for credit depended on taking PPI and cajoled you into nodding through an unwelcome added extra. They might have led you to believe that simply everybody’s taking PPI these days, Darling. Or they might have just added it on without even consulting you. Whichever way you look at it, the happy net result was something extra added, an additional transaction transacted, the wheels of commerce duly lubricated and kept in motion.

The beauty of things like PPI is that, not only do you get the initial fun of one bunch of unscrupulous people adding it on in the first place, there’s also a welcome second hit – and further jobs created – when the scam gets out of hand, flagrancy has arisen, decorum has been compromised, and the public is invited to claim its cash back – plus a bit extra for their trouble. Enter a second band of unscrupulous people to profit from the misdemeanours of the first.

Fears that the whole PPI merry-go-round might soon cease its jaunty gyrating have been mounting for some time now. So it’s always a delight to learn of something similar in the pipeline to keep us all busy moving tokens of value around. Something, for example, like this…

Millions of customers, the Dairy Telegraph reports, could be in line to receive compensation for useless, unwanted or inappropriate intangibles they inadvertently paid for with the solicitous support and encouragement of unscrupulous appointed representatives acting for insurance firms.

Appointed representatives, it seems, are the insurance industry’s equivalent of the irregular forces funded by governments who would rather not get their uniformed forces involved in all kinds of semi-legitimate, speculative, or off-piste activities.

The FCA has suddenly decided ARs need a bit of looking at and – following an in-depth bit of a look at a number of ARs and those who’ve appointed them – concluded that many of the latter “were simply failing to understand and manage the risks arising from their appointed representatives’ activities.”

Specifically, the FCAers identified “poor customer outcomes” including “customers buying products they may not need, products they may not be eligible to claim under, and customers not being provided with enough information to make an informed decision.” Products most affected included warranties (on electrical goods and so forth), GAP insurance (covering heavily branded US-made casual clothing) and travel insurance.

So serious are the irregularities brought to light by the FCA’s bit of a look, that the regulator is now considering having a proper look at what ARs are up to and how insurance firms appoint and supervise them. It is this development that has inspired the Telegraph to speculate that the whole saga could escalate into something with ‘echoes of the PPI scandal’ and lead to a compensation gravy train running into ‘hundreds of millions’ (of GBPs, presumably).

Not necessarily great news for insurance firms. But think of the broader economic benefits!

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