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Critical points from the regulator

The sample was 25 firms – we assume this means insurers, banks, building societies and supermarkets.

Some advertising, according to the regulatory team, misused statistics, made the product appear unique and failed to give enough prominence to which conditions and which costs would not be covered in the event of a claim. Some advertising also implied the product was the equivalent of income protection.

The results will not surprise many advisers who have had concerns about how these products are promoted for many years whether by banks and building societies or more recently by supermarkets.

The regulator says that for those firms found to be non compliant it is not considering enforcement action yet but says if the practices persist it is an option. It has already attracted the ire of consumer group Which? which says the providers should have been fined.

Perhaps that is a little premature as this area is not long into statutory regulation but it should certainly be considered as an option if the poor practice persists.

The FSA is correct to highlight the areas but there are some problems with the announcement. The regulator will not name and shame firms unless it is taking enforcement action and this only appropriate. But it also makes it very difficult to get a picture of where the major problems lie.

The FSA also says these promotions suggest that critical illness cover is simple when it is not given possible exclusions.

Advisers might suggest that if the FSA were to take this logic a little further it might need to reassess how these policies are sold. The ideal of course is that such policies are advised on. If that is not possible then it may need to reassess how these policies are promoted. Specific warnings are required on investment funds and home loans. Maybe there is a case for something more clear cut on critical-illness advertising and other protection products too.

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