Consumer advocate Mick McAteer says the FSA’s proposed changes to the Icob regime are likely to be detrimental to consumers and the market.
In a report commissioned by Unum, McAteer says consumers will be worse off bec-ause the proposal to separate products into simple and complex categories puts income protection products at a disadvantage as it makes them more difficult for consumers to access.
He says: “The FSA’s product categorisation undoubtedly disadvantages the IP sector. Categorising IP in the same group as products such as critical-illness cover and payment protection insurance does not correlate well with the comparative risk of consumer detriment associated with the different product types. Which? is clear that IP is a priority protection product for consumers and CIC and PPI represent a greater risk for consumers.”
McAteer says a three-tier model would be more appropriate, with separate categories for simple insurance products such as motor, home, pet, tra-vel, core health and protection products such as IP and term insurance and another category for complex products such as CIC, PMI and PPI.
But Lifesearch head of protection strategy Kevin Carr says: “Income protection is not disadvantaged in the Icob proposals. All products have to be mentioned equally. I do not think the problem is with regulation, it is more about how the rules will be enforced.”
McAteer also questions how the FSA came to its proposals, saying the regulator’s research was not rigorous enough to justify its conclusions.
He believes the FSA should be taking the retail distribution review, the Law Commission’s work and the Competition Commission’s investigation into PPI into account before making changes and that the consultation period, which ended on September 30, did not provide enough opportunity for thoughtful response.