Responding to criticism of the RDR consultation paper from some in the protection industry, he suggested such attitudes were alarming and highlighted the need for a review of the protection market.
He told delegates: “Some of the reported reactions suggest that it is difficult to mis-sell protection products at all and that no serious consumer detriment can arise – presumably on the basis that if some people have the wrong policy or too much cover that’s no big deal.
“We are alarmed by the apparent complacency in some quarters. Consumers rely on their advisers to help them make the right choices about protection and it is unacceptable to recommend to a customer a policy or level of cover that they don’t need.
“The prevalence of such attitudes would only confirm to us that we need to review our approach.”
Personal Touch development director for DAs Amanda Wilson believes the FSA may be being misguided in its approach to protection.
She says: “The regulator prefers advice to be given and doesn’t like the idea of sales still being associated with financial services, unfortunately as we all know and understand protection will always need to be sold.”
Lifesearch policy adviser Matt Morris says the industry is not complacent about protection misselling.
He said: “In my experience consumers end up with the wrong policies because they haven’t taken advice in the first place, not because they have been mis-sold by a broker. The RDR entering protection would reduce the number of advisers in the market and exacerbate the problem, not help it.”
However, some in the industry agree with Waters’ comments.
Unleash Advice Partnership IFA Adrian Kidd says misselling of protection products does occur, such as selling a life insurance policy to a single person when they have no dependents, or selling a policy when the amount of cover is significantly less or more than necessary.
Kidd warns that if the FSA dug deep enough, it could “find plenty of evidence to suggest that protection is already being abused”.
Aviva UK Life protection director Richard Verdin says he is as concerned as Waters about the reaction of some in the protection industry to the CP.
He says: “It is important that the FSA appreciates that the reported opinions are not necessarily representative.
“Anyone who wants a healthy, dynamic and trusted protection market understands that it has to be submitted to the same principles and standards as other areas of financial planning.”
Results of the FSA’s analysis into the protection market are expected to be published early next year.
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