Protection is not currently under the remit of the review but Carr warns pure protection products – income protection, critical illness and term assurance – should be left alone because commission does not result in product bias or detriment of investment growth in the protection industry.
He says: “Protection should be ring-fenced. The FSA’s two areas of concern don’t apply to protection. With protection there is no investment growth so there is no consumer detriment there and there is no product bias because commission is the same across all products, it is driven by the premium.”
Elsewhere, both Zurich and HSBC launched new “one-stop shop” style protection products which advisers believe could improve consumer understanding of the need for protection and mean more people purchase some form of cover. But they insist the limitations must be fully explained.
Zurich’s two products, decreasing mortgage cover and level protection plan, with the addition of an integrated income protection option should see policyholders receive a lump sum pay out in the event of death, terminal illness or critical illness, or an income if they cannot carry out their own occupation.
But the income protection element, which is designed to cover mortgage repayments, will stop paying out if the policyholder receives a lump sum for a terminal or critical illness. A comprehensive income protection policy would continue to pay out but Zurich says its plan is around 30 per cent cheaper because of this.
HSBC’s new product, LifeChoices, has four elements – term assurance with terminal illness included, sickness cover, a stripped back critical illness with only five conditions and unemployment cover – which can be mixed and matched.
Carr says: “We like the innovation, like the idea of pitching more than just mortgage payment protection insurance and the fact it will get consumers to think about the wider needs of protection. We also like the simplified underwriting. But at the end of the day it’s still a PPI product, which means there will be pre-existing condition exclusions.”
On the topic of PPI, last week the FSA fined mortgage broker Hadenglen Home Finance £133,000 and its chief executive Richard Hayes £49,000 for re-mortgage and PPI selling failures, the latest in the regulator’s crackdown.
The FSA found, during the second phase of its PPI investigation in May 2006, that Hadenglen sold approximately 2,000 re-mortgage and 1,900 PPI customers unsuitable products, exposing them to unacceptably high risk.
FSA Director of Enforcement Margaret Cole says: “The penalty imposed on Mr Hayes should leave senior management within firms in no doubt that the FSA will hold them to account if they fail to treat their customers fairly.”