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PFS Conference: FSA alarmed by complacency over protection misselling

FSA director of retail policy and conduct risk Dan Waters is alarmed by apparent industry complacency about the possible risks to consumers from protection misselling.

Speaking at the PFS Conference today, Waters said attitudes from some quarters of the industry had only confirmed the need to review whether RDR proposals should be applied to general insurance products.

He said: “In our consultation paper, we have identified a risk that introducing adviser charging for investment products may lead advisers to focus on protection, where they might still earn commission.

“Some of the reported reactions to this analysis seem to suggest that it is difficult to mis-sell protection products at all and that no serious consumer detriment can arise – presumably on the basis that if some people have the wrong policy or too much cover that’s no big deal. We’re alarmed by the apparent complacency in some quarters.

“The prevalence of such attitudes would only confirm to us that we need to review our approach.”

Waters reminded delegates that consumers rely on their advisers to help them make the right choices about protection and said it is “unacceptable” to recommend to a customer a policy or level of cover that they don’t need.

He said the results of an analysis into the protection market would be published early next year.

He said: “We are not jumping, however, to any conclusions about applying RDR proposals to protection. We understand that there are real differences between the different markets.”


Plan of action

There is no doubt that the proposals contained in the FSA retail distribution review consult-ation paper are far reaching and constitute a bold move by the regulators.


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. FSA alarmed by complacency over protection misselling
    In 30 years of advising I have never met a client who had too much insurance.

    The greatest consumer detriment is for a breadwinner to die under-insured.

    Where is the FSA evidence to back up their preposterous claims? Lesson one: protection is sold not bought and if advisers are not remunerated for doing the necessary sales work people won’t buy the cover. The FSA will then have succeeded creating a generation of poor widows and disabled people.

    They will be so proud!

  2. Read-across etc
    I am just fed up with the FSA saying one thing and doing another (light-touch mortgage regulation, no read-across from RDR, supporting a healthy intermediary market, amongst many others). They twist every concept to suit their hidden agenda.

  3. Fundamentally flawed regulator
    Dan Waters needs to go with an IFA to see a few familes who have been left without a pot to pee in because their ‘adviser’, if they had one, was too weak, or too stupid, or too focussed on other areas. He needs to understand that most long term financial products, whether they be investment or protection!, are sold and not bought. I would happily find him some prime examples if he has the courage to meet me. Then perhaps we can put some ‘urban myths’ as the FSA calls them to the sword for good. To my simple mind the FSA is going to make a complete hash of it unless it improves its understanding of the market it is supposed to be regulating, take the banks for instance.

  4. Julian Stevens 10th July 2009 at 3:30 pm

    PFS Conference: FSA alarmed by complacency over protection misselling
    Once again, we see the FSA placing the most negative interpretation possible on the general mindset of the intermediary market. Where is the evidence for such a conclusion? I have actually turned away business on occasions because the client had asked me to arrange cover which, upon a more detailed investigation into just what he had already, it turned out he didn’t actually need. With proper FactFinding, I cannot envisage how any other quality IFA would feel able to come to any other conclusion and therefore make any other recommendation.

  5. Reality and the FSA – so near yet so far apart
    The FSA is getting overly sensitive, something that tends to happen when the guilty are close to be exposed.

    Many commentators have stated that it is difficult to be ober-insured and, as a generalisation this is true. Of course, it is also possible to have the wrong type of plan or not enough cover. These are realities that advisers are already aware of, after the £2.3 trillion protection gap is not new, well not to advisers.

    If this nonsense is the best that the FSA can come up with then their tenure has surely come to an end.

    I’ve never received a consumer complaint regarding protection and I never expect to receive one. If the FSA choose to expose this part of the market to their industry decimation plans then I anticipate plenty of complaints from disenfranchised consumers only these complaints will be addressed to Mr Waters.

  6. market Awareness
    Simple really FSA – please understand the market before speculating on what will improve matters – how many consumers will be queuing up to “buy” the overpriced less comprehensive protection products from high street banks, who by the hint of what might be to come, must be just rubbing their palms together, a little! Are the FSA really the same people who demand so much from TCF?

  7. @*&%@@%*
    “We understand that there are realt differences between the different markets” Really Mr Waters? The FSA do not even understand the difference between PPI & Income protection. Nor do they have a clue about the industry they pretend to regulate.
    Another load of rubbish to justify hiking the fees & paper trails for Gi advisers no doubt.

  8. Douglas Carroll 10th July 2009 at 5:12 pm

    Mr. Waters should first of all understand that it is difficult to mis-sell protection products, simply because they are difficult to sell in the first place.

    They are generally sold through the concern that the adviser holds for the vulnerability of his/her client’s situation. When the adviser calculates the required sum assured, a great many clients seek to lowered it through offering a lower premium than that required to do the job properly.

    If people didn’t have to insure their motor vehicles by law then, I’d wager, the majority just wouldn’t bother. After all, they have no intention of having an accident, do they? And they have no intention of being ill or dying, so why bother with protection policies?

    So, iIf you prefer to be remunerated through the commission system, then this must surely mean that any protection policies which you have arranged for your clients have been miss-sold!

    Dan Waters:
    “The prevalence of such attitudes would only confirm to us that we need to change our approach”.

    “I see an opportunity to create a further tranch of fines. Oh, happy days!”

  9. Oh Dear, Another FSA Graduate from the University of Talking-B******s
    Yet again an FSA employee confirms two things; 1) That he does not understand the industry he is regulating; 2) That he does not understand the difference between regulation and extermination. Mr Waters is however an excellent recruiting sergeant for the IFADU. I’m joining – why aren’t you?

  10. Can’t hold back any longer!!!
    How far out of touch can we get when the regulator continues to come out with such comments. There is an acknowledged savings gap, pension gap and protection gap which the regulator, through their continued tinkering and out of touch regulatory changes continues to widen whilst decimating the industry. When will the powers that be realise that they are so far out of touch with reality and appear to have no long term stratergy for the industry (other than shut it down).

  11. Neil F Liversidge 10th July 2009 at 7:19 pm

    Increase Dan Waters’ Understanding
    Dan Waters plainly does not value protection insurance any more than he respects and values those who pay his wages, i.e. us. But I have a remedy. Put and end to the platinum-plated pay package enjoyed by FSA employees. Do away with their DB pension scheme, their sick pay and their death-in-service cover. When they have to find and fund their own income protection or get by on SSP, and pay for their own life cover and pension they might start to appreciate the role of the IFA who keeps them in a job. Like all self-employed people the only benefits I get are the ones I pay for, yet I am forced to pay for benefits enjoyed by people whose only obvious mission in life is to destroy my livelihood and disenfranchise my poorer clients. I am joining the IFADU and I urge all to do likewise. You should all lobby your MPs constantly. IFAs need at least one articulate dedicated lobbyist in every constituency. There is no time to lose and sadly AIFA is not enough. Grass roots campaigning is what is needed to complement AIFA’s efforts. Every MP needs to understnad what danger the FSA mandarins pose to their consituents.

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