The Financial Services Authority’s (FSA) latest release, CP187 Insurance Selling and Administration, has been welcomed for abandoning CP160’s proposal that critical illness (CI), income protection and private medical insurance would be classified as high-risk products and require a tightened selling regime. The booming mortgage market in 2002 saw nearly 1.2m new CI policies taken out, an increase of over 33% on the previous year. And the FSA’s assessment was that if the products had been declared ‘high risk’ then up to 70% of advisers would have left the market.
Ron Wheatcroft, technical manager at reinsurer Swiss Re, said: ‘If the FSA had gone ahead with its proposals it could have skewed the market to such an extent that it could lead to consumers buying short term products rather than long term products, and access to long term products decreasing. Swiss Re did not believe that the high risk concept was appropriate at all. It is not a simple matter of saying the product is complex and is therefore high risk.’
Graham Newitt, protection and housing director at Legal & General, agreed, he said: ‘The regulator’s change of heart means advisers can continue to recommend this vitally important product for homeowners without incurring unnecessary additional regulatory burdens and costs. This should ensure that advisers continue to offer this valuable cover to fully protect consumers.’
CP187 has also simplified arrangements for retail or commercial customers, dropping plans to consider businesses with under £1m turnover as retail.
l For more on CP187 see interview with Ron Wheatcroft page 16.