Many insurance companies are not yet fully complying with Financial Services Authority (FSA) rules on the provision of disclosure documents to customers new research indicates.
The work involved reviewing the content and format of more than 100 policy summaries and Key Facts documents for, household, critical illness, income protection and other types of general insurance. The regulator says a key focus of the review work was on the “appropriateness, prominence and clarity of significant and unusual exclusions, given the potential for consumer detriment in this area.”
Problems identified with policy summaries and Key Facts documents included poor quality of style and presentation, making it difficult for customers to read and understand the documents; The FSA also says not all the required information was included, for example, the cancellation period was frequently omitted from the policy summaries.
In addition, significant and unusual exclusions were either omitted or not given due prominence. And the description of some products was frequently too complex or obscurely worded to be meaningful to a customer.
Clive Briault, managing director of retail markets at the FSA, says: “Providing consumers with simple, clear and understandable information about products is a key part of our general insurance regime. It is true that the industry is still getting to grips with the new regime but these findings are worrying and we are expecting to see a marked improvement over the coming period.
"We will feed back to firms the detailed findings of the survey to help them improve the quality and clarity of disclosure documents and to ensure that the required material is included as specified by our rules. The feedback will include examples of good and bad practice. We will continue to monitor quality and, if it is found that some firms continue in these failings, appropriate action will be taken, including enforcement action if necessary."
A parallel survey conducted by the FSA found that many medium and small sized insurance intermediaries were not complying fully with the rules relating to their provision of Initial Disclosure Documents (IDDs) to customers.
The FSA says the work with medium-sized and small insurance intermediaries found that 261 (62%) of IDDs reviewed did not comply fully with reegulatory requirements. Common errors included: omitting the FSA Keyfacts logo, making minor changes to the FSA prescribed wording, or including descriptions of services or information the FSA does not require firms to provide.
There were further examples of errors that were potentially misleading such as providing inaccurate or no details about access to the Financial Services Compensation Scheme or the Financial Ombudsman Service.
The regulator says the results of the survey indicate some firms are having difficulty in understanding its disclosure requirements when preparing their documents. It also warns there will be a follow-up review early next year.
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 Matthew West on 020 7484 9893 or email [email protected].IFAonline
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