Consumer advocate Mick McAteer fears the UK could be thrust into a protection crisis on a similar scale to the pension crisis in three to four years.
He claims the protection gap, estimated at £2.3trn by Swiss Re, could widen because the retail distribution review excludes the protection market.
He says the FSA must proactively engineer a market distribution structure to meet the challenge of closing the protection gap and is concerned that, by excluding protection, the RDR could prove a missed opportunity.
McAteer says: “In about three or four years time, I think we will be talking about a protection crisis like we are talking about a pension crisis. The FSA must create an effective, coherent regulatory regime and cannot ignore the Icob review.”
Association of British Insurers’ first-half sales figures show protection sales are at a standstill and providers such as Standard Life and Prudential have seen sales halve in the past year.
Le Beau Visage protection consultant Peter Le Beau says: “Sales have dropped significantly this year and I think it is down to the application process taking so long. Protection’s link to the mortgage market, which it has always relied on, has been severed so it is not unreasonable Mick saying a crisis is on the horizon.”