The FSA plans to regulate Teps forcing life offices to inform consumers they can sell their policies on the open market according to MPs and consumer groups.
Treasury select committee member Labour MP Jim Cousins says the FSA has assured him the new Financial Services and Markets Bill gives them the power to regulate Teps and that they intend to do so.
The news comes as the Treasury is set to bring mortgage regulation under the regulator's remit with Treasury economic secretary Melanie Johnson due to make an announcement this week.
Cousins says the FSA have assured him the new bill covers the loophole in the 1986 Act. The currently stop the regulator from compelling life offices to tell policy holders who are terminating policies about the open market option.
National Consumer Council senior policy development officer Harriet Hall believes the new bill gives the regulator the power to regulate Teps, something which was not possible under the Financial Services Act 1986.
Association of Policy Market Makers chairman Lee Portnoi says there is no justifiable reason why life offices should fail to disclose this information to policy holders and is hopeful the situation will change by the end of the year.
Cousins says: “The FSA have told me it is now covered in the bill and when it becomes an act it is the intention of the FSA to cover this.”
Portnoi says: “All some life offices now need is pushing from the regulator. By end of the calendar year all life offices should be notifying policy holders of this option as a matter of course.”
But Cousins is still looking for concrete guarantees about the change as the powers are not spelt out explicitly in the legislation. The FSA Bill, the financial services and markets bill, receives its final reading and debate in the House of Commons this week.