Two options for change on protection age rules

The FSA is to consult on whether protection policies maturing beyond age 70 should be regulated under investment rules as now or be allowed under general insurance rules.

The consultation could open up the sale of policies under Icob rules rather than purely under Cob rules as with investment contracts.

The age limit was origin- ally introduced in the Financial Services Act 1986 to ensure that term policies of more than 10 years were regulated as investments if they provided for a term which took the average person beyond the age at which they were expected to die at the time beyond age 70.

The FSA is now suggesting two options for change. Option 1 is raising the age 70 condition to age 80. Option 2 is to remove the age and 10-year term condition, meaning that firms would no longer endure two regulatory regimes.

It would also mean that whole-of-life plans without a surrender value or where the consideration consists of a single premium and the surrender value does not exceed that premium, could be sold under Icob rather than Cob.

The FSA says the benefit to consumers is that pure protection contracts will be made more widely available to those consumers with a protection need beyond age 70.

It says that, with this change, consumers will no longer be given information about commission payments and projection rates. Advisers would be required to recommend a suitable product rather than the most suitable product.

Scottish Widows protection marketing manager and Association of British Insurers chairman of the protection working party Nick Kirwan says: “This is a pointless hurdle for consumers. Personally, I think they should remove the age limit altogether. Older consumers are more vulnerable and there is a lot of detail to understand behind this rule.”