News Review: Protection

Total premium disclosure: A pointless exercise?

by

Kevin Carr

chief

executive of the Protection Review and MD of Kevin Carr Consulting

by

John Smith

xxxxxxxxx xxxxxxx

if, when about to buy your last new car, the nice salesperson pointed out exactly how much you would spend in petrol and car insurance over the lifetime of owning that car, what might you think? if you think this sounds

rather wise then you will be in favour of this particular FSa requirement. it not, like many within the protection industry you might feel it’s a bit over the top – and you may think it could put some people off buying the cover they need. Last month, the association

of British insurers (aBi) issued guidance on how

insurance providers should disclose the ‘total premium’ for individual long-term pure protection contracts, as required by the Financial Services authority (FSa). in a nut shell, anyone

selling protection will need to tell the customer the total premium over the term of the contract at the start, which means a £30 per month life insurance policy over 25 years would also be expressed as a policy costing £9,000 over the term. the understanding is that

it applies only to products sold under icoBS (insurance conduct of Business Sourcebook) and that firms have until the end of 2010 to implement the change. almost everyone within the protection industry disagrees with it but the argument appears to have been lost even though there seems to

be no evidence suggesting that consumers would benefit from the change. the rule does not apply to protection sales made under coBS rules and the FSa says for variable premium contracts firms must include a statement to highlight that the amount is given for illustrative purposes only and is subject to change. a joint statement from

the aBi and FSa read: “any firms not yet complying with the FSa’s disclosure standard should implement the point of sale disclosure of total premium as soon as possible, but no later than the end of 2010.” or as one iFa commentator recently put it: “this really is a pointless exercise that could easily be ignored if it wasn’t for the potential negative effect that such information can produce.”

Mortgage intermediaries investigated over protection sales

Fears of an increase in commission-led protection sales have caused the FSA to review the sales standards of pure protection products sold by mortgage intermediaries. In the FSA’s RDR consultation paper on

pure protection sales by retail investment firms, the regulator says it is concerned that the movement of intermediaries into product areas where they have little or no experience could give rise to conduct risks. As a result, it will be reviewing the sales standards of

pure protection products by mortgage intermediaries.

But some advisers have criticised the

regulator for targeting smaller practices when it should concentrate on the banks. Either way, one of the most important issues is that many people have taken on more debt than ever before, which needs protecting against ill health and redundancy. This debt probably should have been protected at the time, but better late than never.

News in brief

• Intermediaries can now quote and apply for Aviva’s Term Assurance and Mortgage Protection products on Assureweb

• The Income Protection Task Force is going on the road with a series of adviser seminars across the UK to educate advisers on the need for income protection

• Aviva is piloting a system which lets advisers sell customers ‘top-up’ protection after asking them just a single question

• New ABI director general Kerrie Kelly will be the key- note speaker at this year’s Protection Review dinner on July 15th

• According to the Torys, cancer patients would have access to the cancer drugs under a Conservative government thanks to a £200m cancer drugs fund created by raising the threshold for employers national insurance contributions

• Royal London has reported EEV profit after tax of £404m for the year ending December 31, 2009, compared to a loss of £762m for 2008

• The number of UK dads staying at home to care for young children has risen 10 times in as many years, according to new research from Aviva

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