The Financial Ombudsman Service has asked advisers and providers to be certain that consumers understand the implications of reviewable premiums as these sales have dominated the critical-illness market over guaranteed premiums.
The FOS is concerned that some contracts may not be clearly explained at the outset and customers do not realise that annually reviewable rates, due to their very nature, may have a profound effect on fin-ances over a policy spanning 25 years.
The ABI has spoken to the FOS informally and will be consulting on the issue.
In the last 12 months, several providers have pulled out of offering guaranteed rates, including Prudential, Scottish Equitable and Scottish Widows.
FOS press officer Alison Hoyland says: “We are not here to interfere with product innovation. We are just asking that advisers and providers are clear and up front with consumers as to what will happen in the future with their policies.”
Liverpool Victoria head of sales (South) Mark Anders says: “The FOS and ABI are right to be interested in whe-ther the product is being sold correctly but as far as we are aware, the appropriate advice is being given.”
Insurance Portfolio Consultancy principal Brian Lentz says: “Advisers must be capable of providing both choices – reviewable and guaranteed. If they do not do so, they should not call themselves advisers.”
ABI head of health Richard Walsh says he is not able to comment at this stage on what is going to be done.