New code of practice aims to provide better protection for LTCI customers
The Association of British Insurers (ABI) has published its new Code of Practice for the sale of long term care insurance (LTCI). The Code will come into force on 1 January 2003 and replaces the previous rules set out in 1995.
The purpose of the document is to provide better consumer protection for buyers in the interim period before the Financial Services Authority (FSA) takes control of LTCI in 2004. The publication gives a detailed set of guidelines on what a customer can expect and what advisers and providers should be delivering.
The Code, binding on all ABI member firms, requires the sale and marketing of LTCI to be treated as if it were an investment product. This means the Code will be subject to changes in the FSA rules that govern investment products. The move means insurers will have to provide a key features document and a personalised illustration to customers.
Under the Code, companies must also provide an appeal's procedure and unsolicited calling on potential customers by ABI members is banned. Insurers' sales staff must also be appropriately qualified and have detailed knowledge of the relationship between LTCI and the benefits system.
The Association of Independent Financial Advisers (AIFA) welcomed the publication. Paul Smee, director general of AIFA, said: 'Long term care insurance shares many of the qualities of an investment product. It makes sense for this code to be based on the same regulatory approach.'
The Code is not binding for advisers. Sandy Johnstone, LTCI strategy manager at Norwich Union and chairman of the ABI long term care committee, said: 'The ABI is a provider organisation and therefore has no direct influence on independent advisers. When we were formulating this Code, we felt it important to seek endorsement from IFACare and AIFA. The point of the Code, however, is to give people more confidence to buy these products.'
Graham Fidoe, chairman of IFACare, also welcomed the Code's recognition of the adviser body: 'We are pleased the ABI has recognised that IFACare membership is a key indicator of an IFA's ability to advise in this important area.'
