Payment protection insurance, or PPI, should ensure that people can still repay loans, mortgages, or credit card bills when their income falls, they become unemployed or fall ill.  PI is commonly sold alongside home insurance, mortgages, and buildings and contents insurance, but many catalogue and home shopping companies now offer PPI to their customers.
PPI policies have become controversial, with consumer groups campaigning against them for the past three years.  These groups claim that PPI policies amount to little more than a ‘protection racket’.  Controversy has grown due to the high cost of PPI policies, and the fact that the policies have been mis-sold in the past, with some customers unaware that they were buying the policies. 
The Commission found that an estimated £1.4 billion of ‘excess profit’ was made by PPI plans in 2006.  At the time, banks, mortgage providers and credit card firms faced little competition with their PPI products, with many consumers unaware that they were allowed to purchase PPI elsewhere.  This allowed providers to charge high prices.  The Commission found that most of the 13 million PPI policies in the UK were sold at the same time as a consumer was sold credit.
As a result, the Commission has issued proposals to change the way that PPIs are sold.  Home shopping companies will now have to split PPI away from other forms of merchandise cover.  And credit and insurance providers will have to allow customers a 14 day window after selling any credit or insurance policy, to give customers time to shop around for PPI before taking out a policy.
However, the proposals have received criticism from groups representing PPI providers.  Stephen Sklaroff, director general of the Finance and Leasing Association, claims that “preventing customers from buying PPI when they take out new credit will mean that many vulnerable people go unprotected just when unemployment is rising sharply."  But the Commission insists that its new proposals will mean a fairer deal for consumers.