A financial business giving a recommendation to a consumer will need to be able to show that it took adequate steps to identify and consider the needs of the consumer - and to make a recommendation that was suitable. (Or if it could not make a fully suitable recommendation, at least to point out where its recommendation had some shortcomings.
In many cases this is straightforward to assess. For example, in the case of Mr A (PDF 54KB), the financial business said it was making a personal recommendation. In the case of Mr and Mrs B (PDF 54KB), the financial business specifically recommended the product as suitable for the consumers.
In other cases, it may be clear that no advice or recommendation was given. This might occur, for example, in the context of an internet sale - where the financial business simply sets out the policy for consideration by the consumer without any recommendation.
But in other cases, the position is not so clear cut. Typically, the consumer reports a discussion in which they recall the product being strongly recommended to them. In contrast, the financial business might have documentation that simply talks of drawing the consumer's attention to the option to purchase the PPI policy. Indeed, the financial business may say it never gave advice.
In these cases, we will consider the evidence, and work out what seems most likely to have occurred. Selling might of itself involve some general encouragement. But we are likely to consider as a recommendation any actions which would appear to the consumer to be endorsements of the product in the consumer's own particular circumstances.
Typically, in most PPI sales, the consumer is already engaged in a personal financial discussion with the financial business (about the loan) - and the financial business has access to relevant information about the consumer's circumstances. In most of the cases we see - where PPI is sold in discussion with the consumer (either face to face or over the phone) - the evidence available suggests it will have been on the basis of a recommendation by the financial business.
Sales-process documentation, training manuals and sales scripts can all be helpful evidence in assessing this point. Equally, it might be relevant to assess the degree to which the financial business (or one of its branches) was successful in making sales of PPI to a significant proportion of its consumers in the period. We would also take account of any relevant regulatory findings about past practice.
Obtaining the direct reports of consumers and financial business representatives can also be valuable. But we need to guard against the possibility that recollections of the transaction may be influenced by subsequent events.
The case of Mrs C (PDF 54KB) shows how the ombudsman looks at these issues in the context of an individual complaint.
There is more information about this in the section of our website our approach to payment protection insurance (PPI) mis-sale complaints.