Which? has called for regulators to ensure protection products meet minimum standards.
The consumer watchdog added that the future Consumer Protection and Markets Agency (CPMA) should embrace its role in product regulation.
It made the statement in response to the FSA's discussion paper on product regulation and said the present regulator must tackle problems at the heart of the industry.
As part of its response, Which? called on the CPMA to ‘embrace the role that product regulation can play in addressing conflicts of interest, disciplining markets and aligning the interests of producers with consumers.'
It believes that product regulation could be used by the regulator to: ensure minimum standards for key products; minimise the toxic aspects of products; and ensure the availability of ‘vanilla' products.
In the first of these headings it said: "There are certain products, such as current accounts and protection products that consumers need access to.
"We believe the regulator should ensure that any such products meet minimum standards. We would draw a parallel with motor insurance where all products on sale must meet minimum legal requirements, and consumers then have the option to add on additional ‘bells and whistles'. The regulator may also take steps to ensure that information disclosure is on standard terms, enabling consumers to easily compare products."
The consumer body also targeted the negative effects of payment protection insurance (PPI), suggesting that increased regulation would limit the harm certain products can cause such as single premium PPI.
Peter Vicary-Smith, chief executive of Which?, said: "We're pleased to see Lord Turner recognise that the FSA's ‘hands off' approach to product regulation needs a serious overhaul.
"Which? has been campaigning for years for the FSA to tackle the problems at the heart of the industry - that many are fundamentally useless or, even worse, toxic to consumers. If left to its own devices, the industry will spend its energy inventing products and sales practices that fill the balance sheets but don't deliver for their customers.
"From pension and endowment mis-selling to PPI and most recently the emergence of identity theft insurance, this hall of shame is evidence enough that a new approach is long overdue," he added.
