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ABI wants protection risk rating reduced

The ABI and protection providers are lobbying the FSA to abandon its classification of protection products as higher risk than other types of general insurance as it designs its regime for their regulation.

In CP160, the FSA proposed placing protection in a “higher-risk” category than other types of general insurance because it says their long-term nature makes them inflexible.

But Scottish Provident and the ABI say there is no reason to treat critical-illness cover, income protection, long-term care and private medical insurance differently.

They say their long-term nature actually benefits consumers as they are not subject to annual underwriting, as is the case with other products. ScotProv says the exception should be long-term care insurance, which should be higher risk than household or motor insurance.

The FSA is expected to publish proposals for regulation in Q2, with implementation in January 2005.

ScotProv head of marketing and product development Nick Kirwan says: “The additional things that providers would have to do as a result are not onerous. It is the label higher risk that we have a problem with.”

ABI spokesman Malcolm Tarling says: “We do not believe any of these classes of healthcare products deserve the tag of higher risk.”

The FSA declines to comment.

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