The FSA is being accused of misinterpreting a "simple" European directive in a move advisers say could have huge implications for the protection industry.
According to the Association of British Insurers (ABI), the regulator has understood a clause in the Distance Marketing Directive (DMD) to mean providers and advisers must disclose to clients the total premium of a product.
However, it says other regulators across Europe are asking firms to tell clients of any hidden charges, such as tax, in the monthly premium only.
Advisers say the move will make it even harder to sell an already "undesirable" product while one provider says implementing the changes will cost it upward of £250,000.
"We want to ensure a simple directive doesn't become a complex piece of regulation without any benefit to the customer," an ABI spokesperson says.
It adds the move would be largely unworkable as protection policies vary: "Consumers are not going to benefit from finding out the full price if they can't compare properly."
In July last year, the FSA announced it expected firms selling mortgage payment protection insurance (MPPI) to disclose the total premium.
But in December it issued fresh clarification, saying firms' interpretation of its rules was "not consistent" and telling providers and advisers the requirement also relates to pure protection sales.
A level life policy at £30 a month costs £9,000 over 25 years and exceeds £13,000 when taking into account typical 3% escalation. A £60 policy tops £26,000.
"It's like the FSA is asking us to add one more 'Are you sure you want to buy this?' to the advice," says protection specialist Peter Chadborn.
"Protection is not an easy purchase for a lot of people because, essentially, they are committing money towards something they hope will never happen."
Graham Harvey, managing director at AXA protection, says implementing the changes could cost the provider around £250,000. "We already have a large protection gap and if consumers see this large number in front of them it could scare them off," he says. "I'm not sure it really adds a lot of value."
Legal & General (L&G) includes total premium on products with a set term on its key facts documents. "It is generally accepted protection has to be sold rather than bought," spokesman Joe Wiggins says. "Customers can be put off but, equally, providers must be transparent."
In December's clarification, the FSA said: "In our view the disclosure of total premium will be necessary to put the customer in a position to make an informed decision. The disclosure of the monthly premium alone is not sufficient to enable consumers to make an informed decision." It says its position remains unchanged.IFAonline
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