Banks cream £1,200 profit from every £20 PPI policy sold with loans

UK banks and insurance companies are making profits of up to 982 per cent on payment protection insurance(PPI) policies sold with loans, according to a report by The Competition Commission.

The findings of the latest investigation, presented as a Working Paper, found that lenders are making in excess of £2.6 billion a year from the controversial PPI scheme, with the average revenue from a single premium personal loan PPI policy for banks coming in at £1,200.

Along with the two main consumer regulators, the Office of Fair Trading (OFT) and the Financial Services Authority (FSA), the Competition Commission is carrying out investigations into high-pressure selling tactics that have resulted in many polices being inappropriately and unfairly sold to customers.

With common complaints such as back pain and mental health failing to secure a payout, it has since been revealed that cash earned from PPI that has helped the personal loan remain profitable for banks and other providers. In its report, the Competition Commission stated that: "The personal loans business has suffered from declining profits in recent years to the point where in 2006 it appears to have been loss making before taking into account income from PPI."

Further research by the Post Office has also found that PPI linked to a loan can cost five times more than standalone PPI, saving on average £705 over the period of the loan. Post Office Head of Protection Products, Duncan Caesar-Gordon, has called for a "more transparent" and "fairer marketplace."

The Post Office found average monthly PPI premiums stood at £28.05 – or £14.88 for every £100 of cover. "The Post Office has been calling for an open market for PPI sales since 2006, where providers are honest with customers that other, cheaper, standalone products are available, and has contributed to the Competition Commission's investigation to this effect," said Mr. Caesar-Gordon.

"Many customers continue to have little understanding of PPI and some do not even realise they have this insurance in force. Others, who have been at the hands of aggressive sales tactics, can feel they have no choice but to take the expensive policy tied to a loan or credit card if they want their application to be accepted," he added.

Tim Moss, Head of Loans at moneysupermarket.com, has also critisised the current trend of mis-selling PPI: "This study may well bring a return to old-fashioned banking where the headline rate told you everything about a loan. Lenders may have to go back to the days where they made their money out of the interest rate they charged, rather than the additional products they sell."

However he warned that a change in the regulations could be reflected in a new pricing structure: "There will be more transparent pricing, but market-leading loans could well go from six or seven per cent up to eight or nine per cent, if PPI is clamped down on. Rates would have to go up to replace lost profits."

Lift Canada bank, insurance merger limits: Manulife

TORONTO (Reuters) - Canada should allow its financial services companies -- banks and insurers -- to merge, subject to some conditions, Dominic D'Alessandro, the chief executive of Manulife Financial Corp , the country's biggest insurer, said on Monday.

"We should be looking at allowing cross-pillar mergers ... provided the widely held rule was preserved, and competition remained vigorous," D'Alessandro said during a panel discussion organized by the Conference Board of Canada in Toronto.

"Cross-pillar mergers" refers to tie-ups between banks and insurance companies, but D'Alessandro later hinted that barriers that stop banks uniting with banks and insurers joining up with their peers in Canada should also be scrapped.

Within Canada, there are now 10 or 11 "sizable" financial institutions, he said.

"Maybe, with a small population base like ours, we can't support 10 or 11. But we can support six or seven," he said.

In 1998, the Liberal government rejected two proposed bank mergers. Current Finance Minister Jim Flaherty, of the ruling Conservative Party, has repeatedly said bank mergers are not a priority for his government.

Flaherty repeated that position on Monday despite a resurgence in pressure recently from several quarters, including Canada's big banks, to end merger restrictions. The banks argue that without takeovers the country's institutions are becoming uncompetitive globally.

Under the "widely held" rule, ownership of Canada's big banks and life insurance companies is limited to 20 percent.

Manulife this month bought C$500 million worth of shares, in a private placement by Canadian Imperial Bank of Commerce , making it one of the biggest shareholders in Canada's fifth biggest bank.

(Reporting by Jonathan Spicer; writing by Nicole Mordant; editing by Renato Andrade)

Step up efforts in AIDS campaign

When Wen Jiabao and then Hu Jintao visited AIDS patients in Beijing hospitals in 2003 and in 2004 respectively, the Chinese government seemed prepared to confront the virus head on. But, such action has come too late and has proved to be as weak as the disease is virulent.
Foreign and local businesses in China, with a special role to play, are similarly tardy even as the virus is increasingly landing on their own doorsteps.

Official and unofficial statistics differ, but taking a median position, it's likely there are around one million Chinese infected with HIV, the virus leading to AIDS. Infection rates are climbing at a rate of around 30 percent annually and the most affected group is between 15-29, the country's key productive and consumer demographic and, essentially, China's future.

It looks dire, a conviction confirmed in a report by the United Nations AIDS office. In 2002, UNAIDS published a report on the disease on the mainland called, dramatically, "China's Titanic Peril."

It argued: "A potential HIV/AIDS disaster of unimaginable proportion now lies in wait to rattle the country, and it can be feared that in the near future, China might count more HIV infections than any other country in the world."

Part of the rationale for that gloomy projection is the manner of the virus' spread. In South Africa, for instance, it has been noted that when the virus first took hold in the early 1990s, its prevalence rate was at just 1 percent. By 2003, it was at 20 percent and rising fast.

The shape of HIV's establishment in a population puts the onus on officials to act quickly. This China has not done. The first AIDS case in the mainland was detected in 1985.

Despite this, as with SARS outbreaks some years later, Beijing buried its head. It was not until 2003 that Beijing initiated assistance packages and prevention measures, such as the "Four Free and One Care" policy. It was not until 2006 that the State Council launched the government's first real preventative legislation and admitted AIDS was an issue needing such high profile attention. Beijing's laxity has clearly left many gaps in the AIDS landscape in China. This puts both a moral and an economic obligation on to the private sector.

Unfortunately, in general, the corporate sector has followed Beijing's poor lead and has tended to find the same sand pit for its troubled head. The moral case is clear. Morality is deemed to come at a cost.

In an article on the business response to AIDS in the Harvard Business Review published in 2006, authors Mergen Reddy and Boetie Swanepoel noted: "The root constraint for companies trying to manage HIV, we believe, is not the inadequacy of therapies or education, but cost." The question of direct cost comes down to a balance between losing workers, both existing and potential and consumers, and the cost of finding ways to lessen the impact of the disease.

Reddy and Swanepoel have devised risk-trading measures, via already existing corporate insurance policies, and a schedule of investment instruments allowing employers (in the mining sector, which was the target industry) to cut the costs of employee treatment by up to 40 percent, leading to a halving of employee absenteeism rates.

Any such programs must be founded on excellent stakeholder communications with relevant bodies.

In China, this would include government and any of the many civil groups active in the field.

A new report from the World Economic Forum showed 47 partnerships have been set up in around one million workplaces around the world.

Businesses in China therefore have plenty of models. They have had plenty of warning.

But action is so far limited.

There is no time to waste on AIDS in China, which just makes it all the more bizarre as to why that commodity is indeed being squandered.