Speaking at the Association of British Insurers’ biennial conference today, FSA chairman Adair Turner said insurers must also resolve legacy problems caused by out-dated IT systems and move to simplify products.
Turner said while problems in the payment protection insurance market have already emerged, there could be more trouble to come from mortgage payment protection insurance.
He said: “On a broad definition of protection, we have of course seen major problems in the PPI market. And while mortgage payment protection insurance has not previously been a major focus of our concerns, it may become one in an economic downturn.”
Turner added that insurers that are increasing premiums for existing policyholders as the likelihood of unemployment-related claims rises, might not be treating customers fairly.
He said: “Whilst it is natural for the industry to respond to changes in risk, this raises issues with both unfair contract terms, disclosure and our TCF principles. How many consumers would have taken up this cover if they had known that at the very time they needed the protection the most, the price of it could significantly increase or the amount of cover decrease?
“This is an area where insurers must expect us to intervene to address poor consumer outcomes. And more than that they must think strategically about the impact of their actions on the sector’s reputation.”