11/03/03

While welcoming much of the Financial Services Authority’s latest consultation paper on the regulation of general insurance, life and health insurance products, the ABI (Association of British Insurers) is concerned that proposals to create “higher risk” products and protect some business customers are unnecessary and could reduce access to cover.

In response to FSA consultation paper 160, the ABI sets out its concerns on:

The proposed designation of certain types of medical insurance as ‘high risk’. The ABI does not accept the proposal that income protection, critical illness and private medical insurance require additional safeguards in the sales process. These are good value and easy to understand products.

Customer classification.  The FSA’s proposal to give more protection to small business customers than other commercial customers adds to that already in place through the Financial Ombudsman Scheme, and the Financial Services Compensation Scheme. This could impact on the cost and availability of cover.

John Parker, the ABI ‘s Head of General Insurance, said:

“ Much of this latest consultation paper recognises the importance of delivering adequate consumer protection, balanced by proportionate costs.
However the FSA has overstated the consumer detriment involved in the products it proposes to classify as “higher risk”. Creating a specific category of products in this way, without any justification, will dissuade customers from buying them, and make it harder for them to be sold.  

“ The FSA has also yet to make the case for additional protection for small businesses. We need to see evidence of the problem if we are to have an open discussion about the costs of regulation to tackle it. "

“ In both cases the FSA’s proposals go beyond the terms of the Insurance Mediation Directive they are implementing. We must not lose sight of the need to ensure that proposed regulation is cost effective and proportionate. "

Provided by the ABI