FSA details proposals to boost consumer protection

The Financial Services Authority (FSA) detailed its objectives and key requirements for regulation at the Association of Medical Insurance Intermediaries' (AMII) annual general meeting, writes Angela Faherty.

Sarah Wilson, director of the FSA's high street firms division, explained the FSA's overall objective was to design a risk-based regulatory regime for insurance products.

Wilson stated consumer protection, public awareness, market confidence and the reduction in financial crime are the main objectives of the FSA in its approach to regulation. She added consumers would be protected where appropriate and the FSA would 'promote the benefits and risks associated with different products, as well as providing advice for customers.'

The level of risk associated with different insurance products will be graded according to complexity, selling process and the ability to recover. 'We need to consider the likelihood of a consumer understanding the product and therefore making an informed decision. They need to have a great choice of products and the ability to shop around. It is important that they have the ability to recover from a poor purchase before a claim has been made, as well as once a claim has been made.'

In outlining product risk, products such as long term care, income protection, critical illness and private medical insurance all fell into the higher risk category. Wilson attributed this to the use of complex terminology to describe these products. She said once a consumer had fallen ill, their ability to recover was low, as they might not be able to retain the same premium levels.

Wilson denied that the FSA's rules asking businesses to disclose product features, capital and Professional Indemnity were favouring broker networks, by forcing smaller businesses with no capital to disappear under a larger banner. She added there is a possibility that commission details may need to be disclosed under the new rules.