New treatment of fee disclosure to consumers represents ‘a licence for the unscrupulous to hide charges' says trade body
Biba has today warned that the FSA's proposed new treatment of fee disclosure to consumers in respect of lower risk or ‘other’ general insurance products represents ‘a licence for the unscrupulous to hide charges’.
The trade body was formally responding to the FSA’s consultation paper 07/11 which puts forward a differentiated approach to insurance conduct of business (ICOB) regulation for protection products and ‘other’ general insurance products. The paper marks a significant step forward in the FSA’s move to a more principles-based regime.
Steve White, Biba head of compliance and training, said: “The removal of the need to separate a fee from the premium when selling a lower risk product to a consumer is an extraordinary proposal, particularly given the FSA’s scrutiny of commission disclosure in the commercial market at the moment.”
Biba said it fully supported the FSA’s move to a more principles-based regulatory environment because of the freedom and flexibility that such a regime will allow firms in their day-to-day business. There are certain proposals in CP07/11 which Biba criticises, however.
White added: “We are also concerned about the proposed classification of private medical insurance as a low risk product, the deletion of the inducements rule, the removal of the requirement to provide a ‘policy summary’, the removal of demands and needs statements for insurers and the presentation of the rules themselves.”
Proposals to remove yet further disclosure requirements for insurers have heightened Biba's concerns. Eric Galbraith, BIBA’s Chief Executive, said: “Biba fundamentally believes that consumers should be entitled to the same set of disclosures, irrespective of where they choose to purchase insurance and we are very disappointed that the FSA do not agree.”
Galbraith continued: “We have established through research that consumers are confused about the status of the firms they are dealing with and the FSA have seen this research. We support the FSA’s increase in budget for its financial capability activities and for running its ‘Insurance made clear’ campaign. However, what we find both contradictory and alarming is that the FSA should propose changes to its ICOB rules that will inevitably lead to greater consumer uncertainty and ultimately detriment.”
