The government must play a part in ensuring the ICOB review closes the price gap between advised and non-advised protection sales, says John Greenway MP, chairman of the All Party Parliamentary Group on Insurance and Financial Services.
In a briefing today on the Cover magazine - sister publication to IFAonline - Promoting Protection campaign, Greenway stated: “We want to see people being encouraged to buy the right protection. The government must take an interest in the Financial Services Authority’s review of general insurance to ensure the gap on price between advised and non-advised sales is tackled.”
Greenway believes unless the price gap reduces and regulation is adjusted, the UK will end up with a mis-selling crisis similar to that seen in the payment protection insurance (PPI) industry where people are badly advised and are “ripped off”.
Kevin Carr, head of protection strategy at Lifesearch, says consumers do not want to pay extra money for advised protection because the products are sold over the internet and they assume they can do it themselves.
He states: “The FSA needs to level the playing field by making it easier to take advice to consumers directly, in the way that we do. It needs to stop the gap between advice and non-advice growing.”
In general, Carr says the reason people think they cannot afford protection, particularly income protection (IP), is down to perception rather than reality.
He says: “The average IP premium we sell is £29 a month and this has not changed in nine years. The average PPI premium is a lot more than that. Regulation allows PPI to be sold at the expense of other products without brokers breaking any rules.”
Dr Michael O’Donnell, chief medical officer for UnumProvident, believes the adverse publicity targeted at advisers is one of the reasons why people are not buying advised protection.
In addition, he suggests advisers need to take more time in allowing clients to think about protection, rather than rushing through a sale, so they have more chance of understanding the products.
Nick Starling, director of general insurance at the Association of British Insurers (ABI), adds: “We need to ensure the FSA strips out irrelevant information from the point of sale and takes a risk-based approach without complicating things. The difficulty is the issue of disclosure – the trick is to get the right balance.”
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7034 2680 or email [email protected].IFAonline
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