The FSA has told all firms selling standalone protection policies to review their sales process after finding “significant failures” by firms to comply with oral disclosure rules.
The regulator has written to all firms selling pure protection policies, i.e. protection that is not linked to an investment sale, to ensure they comply with the Insurance Conduct of Business Sourcebook rules.
In a letter dated November 29 FSA director of conduct policy Sheila Nicoll “requests” that firms carry out a review of their sales processes to ensure they comply with ICOBS.
Firms will have to provide written confirmation to the FSA within six months that a review has been completed and their protection sales process is compliant.
If firms cannot comply with ICOBS within six months, they still have to write to the FSA with a plan and timetable of how they will change their processes to meet ICOBS rules.
In the letter Nicoll says: “We will continue to monitor closely whether the information provided by firm complies with our requirements. Should it come to our attention that a firm is not complying, we will consider the extent of the breach and the appropriate regulatory action.”
In June the FSA published its post-implementation review of the ICOBS rules which came into effect in January 2008.
It found that firms were not making it clear to customers whether they were being given advice or information, and that product features were explained poorly.
The regulator also found significant exclusions and limitations were often not highlighted, and firms frequently failed to highlight the importance of disclosing pre-existing medical conditions.
The findings were based on consumer research with over 1,000 customers across two studies in 2008 and 2009, and a call listening exercise with 11 firms in 2009.
The FSA says although their findings relate specifically to sales of critical illness cover, the same ICOBS rules still apply to all non-investment protection products.