Income protection insurance (IPI) policies could breach the principles of the FSA's Treating Customers Fairly (TCF) initiative, a study by Defaqto has claimed.
In its first report into UK long-term IPI products, Defaqto higlighted the consumer detriment caused by the complexities and inconsistencies in policy terms and conditions as providers seek competitive advantage rather than consumer benefit.
One example it gave was the fact there are 13 different methodologies used by providers for the calculation of the maximum insurable percentage of salary. The complexity surrounding these rules means that the likelihood of setting a realistic level of benefit is remote, undermining faith in the product, it said.
Also, there is generally no contingency to refund overpaid premiums.
Nick Telfer, head of life and protection at Defaqto and author of the report said: "I believe that income protection should be the most important item on anyone's protection shopping list but, as highlighted in the report, the industry will need to change significantly before consumers and advisers warm to these products and I do not see any evidence of this at the moment."
