Blog: FSA is willing to listen to the protection market

The FSA is currently consulting on its guidance for payment protection insurance (PPI) and potential replacement products such as short-term income protection (STIP).

Steve Devine, chairman of trade body Protect, produced a personal blog following his meeting with the regulator to discuss its plans and the potential impacts.

The FSA's main message is that it welcomed opinions from all stakeholders and it has not named any specific products that are cause of concern.

However, there are a vast amount of short term protection products that have been in place for many years and are not PPI products but could be captured in this net, so the guidance relates to both new and existing products.

At present the FSA holds the view that debt waiver and debt freeze products are not insurance products - but it said there is an open offer for any evidence that supports or contradicts this view to be submitted in the consultation.

Whether the FSA intends to widen their approach in the guidance to all products not just STIP and PPI, will depend on the feedback received and on product risk reports, which I would interpret as a yes.

Encouragingly, the regulator recognised the importance of claims benefits and the fact that insurance products often negate the need to cash in fixed term products and cash ISAs.

It took the point about claims benefits not being seen as purely monetary and the value of rehabilitation, counselling, and other back to work services needing to be considered too.

But it has requested more evidence on the matter.

There also appears to be an issue regarding mitigating product risks and consumer outcomes, going into the very core of what insurance is; the use of exclusion periods, the pooling of risk, anti-selection and so on.

Product innovation is unlikely to be encouraged by the proposed FSA product intervention and as a result, future products could end up either a plain vanilla, or fully underwritten, and therefore expensive or unaffordable.

Finally, I'm appealing to the industry to please take this opportunity to make your points and also defend those decent, effective insurance policies that are currently protecting policyholders, providing peace of mind, and paying claims.

For everyone contributing, do not assume anything and make sure evidence is provided that backs up your points - even on the most basic ones.