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RDR CP: New review for protection market

The FSA has announced that it will review possible changes to regulation of the pure protection markets.

In the latest retail distribution consultation paper, the regulator said it was necessary to ensure new forms of consumer detriment do not arise from firms’ responses to the implementation of RDR in investment markets.

It is not bringing forward any proposals for the sale of pure protection products currently but will take account of comments and evidence provided by respondents to the paper.

In the first quarter of 2010, the FSA will publish the results of its analysis and proposals for the sale of pure protection products by retail investment firms with a timetable for consultation and implementation.

It said: “If we make no changes in the regulation of the sale of pure protection policies, then we consider that some firms may see a commercial incentive to shift their sales focus to pure protection products to maintain commission income.

“Our initial view is that unless we act to limit potential material risks to consumers, potential distortions in advice relating to pure protection products may arise.”

Friends Provident chief executive Trevor Matthews says: “The FSA has expressed concern in the consultation paper whether some firms may shift their focus from retail investments to protection products as a result of the RDR to the detriment of consumers. In the light of the well known and huge protection gap in the UK I believe this concern may be overstated.”

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