The Association of British Insurers has criticised the FSA's proposals on general insurance regulati...
The Association of British Insurers has criticised the FSA's proposals on general insurance regulation to create 'higher risk' products and to protect small business customers, saying they are unnecessary and could reduce access to cover.
In response to the consultation paper 160 on general insurance regulation the ABI said that it does not accept the proposal that income protection, critical illness and private medical insurance require additional safeguards in the sales process.
On the contrary, says the ABI, these forms of insurance are "good value and easy to understand products."
John Parker, the ABI'S head of general insurance, said that the watchdog has overstated the consumer detriment involved in the products it proposes to classify as "higher risk".
"Creating a specific category of products in this way, without any justification, will dissuade customers from buying them, and make it harder to be sold," he added.
The ABI is also critical of the regulator's proposal to give more protection to small business customers than other commercial customers, who already benefit from access to the Financial Ombudsman Scheme and the Financial Services Compensation Scheme.
The obvious issue with giving more protection to small business is that it could impact on the cost and availability of cover.
The Institute of Insurance Brokers, in response to the same consultation paper, also warned against the FSA's proposal to classify 80% of all UK SMEs as private customers as it would extend the boundaries of the already existing 'Nanny State'.
The IIB argues that small businesses should not be offered the same regulatory protection as private persons as they take a financial risk in pursuit of their venture and thus must exercise 'businesslike diligence' in their selection of advisers and any contracts that propose to engage in.
Parker says, "In both cases the FSA's proposals go beyond the terms of the Insurance Mediation Directive they are implementing. We must not lose sight of the need to ensure that proposed regulation is cost effective and proportionate."
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