Collectively, panellists and delegates at this year’s Protection Review conference in London criticised the FSA’s concerns that the pure protection market could attract a disproportionate number of investment advisers looking to maintain commission-based sales by selling protection.
They said an increase in protection sales is not likely to cause consumer detriment but only enhance the market and help close the current £2.3trn protection gap.
Speaking at the conference last week, Friends Provident chief executive Trevor Matthews said there can be no serious consumer detriment from selling more life and protection business, therefore the FSA should not extend RDR to embrace protection.
He said: “I think this is completely the wrong idea. There cannot be any serious consumer detriment by selling more life insurance, income protection and protection products. I think everyone in this room should be arguing strongly not to extend adviser charging to protection products.”
Likewise, Pru Protect director of protection Kevin Carr said it is very difficult to mis-sell protection products, suggesting the FSA’s intentions are misplaced.
He said: “If other advisory parts of the market are given encouragement to sell protection, then that is something we would all welcome.
“I believe it is difficult to mis-sell or oversell protection. If someone has got too much critical illness cover is that really such a bad thing? The worse that can really happen is you can sell income protection to someone who already has it through their employer.”
Delegate Highclere Financial Services partner Alan Lakey said the concerns are “intrinsically bizarre”. He said: “The FSA is out of touch with the reality that products need to be sold.”
However, the FSA in its ‘Delivering the RDR’ statement said these risks seem “sufficient” enough for the regulator to review closely whether changes are needed in its regulatory approach to pure protection markets to ensure new forms of consumer detriment do not arise from implementation of RDR.
In the mean time, however, it said: “We are not bringing forward any proposals for the sale of pure protection products at this stage, but will take account of comments and evidence provided by respondents to this consultation paper.”
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