Product category:
Protection
News Release from: LifeSearch | Subject: Protection
Edited by the Insidemoneytalk Editorial
Team on 22 March 2007
LifeSearch comments on FSA interim
report on insurance regulation
LifeSearch welcomes the initial findings from today's FSA ICOB report, but warns of ongoing consumer detriment.
The UK protection gap stands at ?2.3trn*, which has increased while the number of consumers buying protection without advice has also risen LifeSearch therefore welcomes the FSA's recognition that personal protection products are not as simple as general insurance (GI) products, such as car and motor insurance, and as such supports the view that they should be regulated differently
This article was originally published on Insidemoneytalk on 14 Mar 2007 at 8.00am (UK)
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LifeSearch is also pleased the FSA are concentrating their efforts on personal protection products rather than general insurance, as the potential for consumer detriment in this area is far greater.
While the distribution of general insurance products works well, the FSA report found that firms selling practices have an important role in reducing the risk of consumer detriment for those buying personal protection products, such as payment protection insurance (PPI) and critical illness cover (CIC).
LifeSearch Managing Director, Tom Baigrie, said "We are delighted that the FSA ICOB review team has listened to the views of the industry and as such is looking to address the consumer detriment being caused in the personal protection market".
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"Consumer campaigns promoting the value of advice have been influential in encouraging the regulator to re-consider the information made available to consumers when they purchase insurance products".
"However, it is important that personal protection products are kept together as a suite of protection products as simplifying the regulation of any individual product will not drive more people to purchase the right protection product".
"Instead, this would cause a greater supply of stand alone product sellers, which further reduces consumer choice and access to the most suitable products".
"The result is that the current mis-match between what consumers have access to and what they need will only become greater." LifeSearch also remains concerned that the FSA is yet to fully understand that the key cause of consumer detriment in personal protection is the growing number of non-advised sales and the manner in which these currently undervalue advice and product suitability.
Independent research suggests that consumers are seeking advice from advisers less frequently when making a decision, which differs to the regulator's view that most protection sales are advised.
Head of Protection Strategy for LifeSearch, Kevin Carr, said "In differentiating the market between commodity general insurance and more complex personal protection, the FSA must be careful not to over-simplify the personal protection market".
"The review document states that while consumers buying personal protection are more interested in the policy details and the need for advice, when compared with consumers buying GI, this should not be allowed to create a misleading generalisation of the personal protection market".
"It is still the case that the vast majority of personal protection policies are sold on a non-advised basis without any discussion of the policy details at the point of sale.".
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