The Treasury's proposed suite of Sandler products has suffered a significant setback after receiving harsh criticism from the unlikely source of the FSA.
Last week, outgoing FSA chairman Howard Davies weighed in to the debate over price caps by publicly commenting that he does not personally believe in them and has seen no evidence from other industries they benefit consumers.
At the same ABI conference in London, FSA director of conduct of business standards Michael Folger said of the Sandler suite that if the risk of misbuying is removed, the Government will be left with the certainty of non-provision.
His comments have been interpreted by providers to mean that some misselling or misbuying will have to be tolerated if greater market penetration is to be achieved.
Life office sources say Davies is right to express his views on price caps as the FSA is responsible for prudential regulation which is affected by price caps.
Davies said: “I don't think that we should be product designers, nor do I personally believe in price controls. It is very difficult to find evidence from any other industry that proves that price controls are good for consumers.”
Folger said: “Are we exchanging the risk of misbuying or misselling with the certainty of non-provision? How much misbuying at the fringes are we going to tolerate? This is one of the issues for the FSA board to consider.”
Norwich Union Life executive chairman Philip Scott says: “One of the responsibilities of the FSA is the financial strength of the industry, if there is a market mechanism which would lead to substantial losses, that is an issue for the FSA.”
Friends Provident managing director Ben Gunn says: “If he is saying it in public then I have no doubt that Davies has been saying it in private to the Treasury in the past.”