RDR: Protection proposals could cost insurers £20m
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The FSA’s proposals on the sale of protection following the implementation of the retail distribution review could cost insurers up to £20m.
In its latest RDR protection paper today, the FSA is proposing that commission payments stay for protection business sold under Cobs and Icobs. It is also proposing that bancassurers and providers who directly distribute their own products, where no commission is paid, explain how the customer will pay for pure protection services.
As a result of the proposals, compliance costs for providers will be between £10m and £20m. The paper says: “The ABI has assisted us in estimating provider costs by taking some initial soundings from providers, covering approximately 50% of the pure protection market. From this information, we expect the aggregate level of one-off provider costs to fall within a range of £10m to £20m.”
The FSA also says retail investment firms must explain how they are remunerated where pure protection services are ‘associated’ with investment advice. It is proposing that advisers disclose the amount of commission they receive if the customer then purchases a pure protection product.
As a result it estimates that overall costs to intermediary firms will reach £1.2m to £1.9m per year. It says incremental costs to firms will be £1 to £1.50 per customer.
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Readers' comments (1)
don reston | 27 Mar 2010 4:29 pm
protection kept on a commission basis makes sense as people will not pay a fee for life cover alone. i agree all providers keep to the same level of pay and therefore no favoritism can take place
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