Consumer panel challenges FSA action on PMI

by Gill Montia

Story link: Consumer panel challenges FSA action on PMI

The Financial Services Consumer Panel (FSCP), the body that advise the Financial Services Authority (FSA) from the point of view of an independent consumer, has warned that new rules governing the sale of private medical insurance (PMI) will put policyholders at risk.

The FSA plans to put PMI in the same category as car and household insurance but the FSCP believes that PMI is too complex for this category and requires more detailed regulation than it will receive.

The proposed change forms part of the FSA’s move towards “principles-based” regulation, which has removed the need for certain detailed rules about the sale of products such as household, motor and pet insurance.

In other areas of insurance, such as payment protection, requirements will be increased because the FSA considers that some customers are being treated unfairly.

The FSCP is generally in favour of the new approach but points out that the medical terms and concepts contained in PMI make it complex.

In addition the panel has evidence that consumers sometimes find it difficult to change PMI providers.

For these reasons, it wants PMI to retain its existing status and be subject to the same regulations as payment protection insurance.

The FSA maintains that while the medical terminology found in PMI products is complex, many insurers used standard terms and conditions and this helps consumers to judge the suitability of the product.

The new rules are being introduced in January 2008, after which the FSA will monitor the situation with regard to PMI to ensure that the change is not detrimental.