Long-term care insurance is to be classified as an investment product while protection products such...
Long-term care insurance is to be classified as an investment product while protection products such as critical illness will no longer be seen as high-risk products.
A statement announcing the FSA's latest consultation for general insurance regulation says protection products which were previously labeled as high risk products under CP160 will not be subject to a specifically tailored regime, but other requirements will be added to protect against different insurance risks.
The FSA says long- term care insurance will no longer be seen as insurance but as investment so a separate consultation paper will be published later in the autumn to discuss its regulation.
Once new regulations come into effect in January 2005, insurers and intermediaries will also have to disclose all "significant and unusual exclusions" to customers before they sign they deal, says the FSA.
This means consumers will have to be told up-front which medical conditions and types of illness will be excluded from a policy, in the hope consumers are less likely to buy "inappropriate cover".
One key change which has already upset the Institute of Insurance Brokers (IIB) is a plan to categorize all mortgage and insurance brokers as commercial customers, rather than private customers, because the minimum level of business is significantly higher.
The IIB's argument is proposed application fees seem unfair for most small firms with commission and fee incomes of up to £100,000 because they will fall under the same band as all brokers with annual income of up to £1m.
A lower band should still be created for these brokers and advisers, says the IIB, which could carry a £250 fee for early electronic applications.
Figures quoted by the IIB suggest firms which then crosses the £1m annual income mark will be forced to pay 1600% more in application fees.
Andrew Paddick, director general of the IIB, says:
"The last thing I want to see is a large number of very small professional brokers, who serve their local communities well, being forced out of business as a result of direct and indirect regulatory costs they simply cannot afford to pay.
"It is essential that FSA fees are proportionate to the size of business concerned and to achieve this the FSA will need to ensure that it is a highly efficient cost-conscious regulatory operation," says Paddick.
FSA officials point out that there is a consultation on whether there should be a discount for early electronic applications, when the regulatory body starts accepting applications in January 2004.
Changes are also on the way for those solicitors, accountants and actuaries which have connections with insurance and mortgage business - seen at present as exempt professional firms - and they will have to be registered with the FSA in much the same way firms doing pensions and investment business had to under N2 from November 30th, 2001.
Full details of CP187 document - this time running to 318 pages - are now available on the website and closing date for responses to CP187: Insurance selling and administration and other miscellaneous amendments is September 30 with final rules due in January 2004.
More details about CP187 will follow as feedback comes in.
SPECIAL NOTICE: Advisers should also note that all FSA telephone numbers from today onwards read : 020 7066, followed by the extension number.
The FSA switchboard number is now 020 7066 1000.
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