The Financial Services Authority have recently said that payment protection and critical illness cover proved far riskier for consumers than other general insurance policies such as household and car insurance.
The Financial Services Authority have said that their review of general insurance regulation would consider whether the insurance conduct of business rules provided sufficient safeguards for consumers in the sale of protection policies, and to find out whether the rules benefit consumers taking out general insurance policies.
The review will determine whether there is an argument for deregulation of these products. The review will be published in the first quarter of 2007, and will make recommendations for rule changes where appropriate.
Our view
Lump sum payment protection insurance is generally expensive but we cannot see that critical illness protection is any more riskier than household insurance. If you are covered and you make a valid claim, yourwill receive benefits, if you are not covered, you will not.
This is the same for household, motor, life, critical illness or any other insurance. You pay a risk based premium for a given insured risk and are protected if the worst happens.
The FSA should be careful about potentially discouraging people to insure these very real risks.