They set targets for Personal Payment Insurance and look what happened.

The impact of mis-selling personal payments insurance rolls on, now with concerns about the activities of claims management companies. 

It started with financial services companies providing loans.  There’s nothing particularly wrong there, providing the lending is prudent and appropriate.  Let’s assume it is.

These companies wanted to increase their profit margins, as they were targeted for revenue.  Increasing the interest rate charged on the loans was difficult as this is transparent and consumers can easily compare rates between different lenders.  Adding PPI was easier.  Selling PPI where the customer was not eligible was easy too.

All this was driven by a pressure to hit targets for the financial services companies.  Targets which were not linked to their customers’ needs; just those of the finance companies.  Had the measures been put in place related to the customer the outcome would have been very different.  For example an objective to sell PPI to 80% of eligible customers may have been better.

The problem with targets is that they make people cheat.  Management pressure people to hit targets.  Sometimes factors external to the situation make it difficult or impossible to hit the target.  As more pressure is applied staff find ‘alternative ways’ of meeting them, in this case by selling PPI to people who were ineligible.

Now the Legal Ombudsman is having to intervene as claims management companies driven by targets unrelated to their customer’s purpose.  The failures of mis-selling have created an industry to sort out PPI and now that being scrutinised for its own failings.

We need to get to grips with understanding our customer’s purpose and then measuring our success against it.  This will help us build stronger and more ethical businesses.  Fulfilling true customer purpose is the key to success.