FSA to change FSCS insurance compensation limits
The Financial Services Authority (FSA) has announced that it is going ahead with proposed changes to the compensation limits for insurance, investment and home finance advice business, in the event of a firm failing.
The move is aimed at achieving greater simplicity and consistency in the Financial Services Compensation Scheme (FSCS).
The regulator’s managing director of retail markets, Jon Pain, explains: “The changes will help consumers understand and have confidence in the protection provided by the FSCS. In particular it removes the current potentially confusing provisions under which some parts of a claim can be paid out at 100% and other parts at 90%.”
From 1st January 2010, all claims for non-compulsory insurance will be paid at 90%, with no upper limit.
Currently limits are set at 100% of the first £2,000 and 90% of the remainder, with no upper limit.
Also, for non-compulsory insurance provision (both general and life insurance) protection set at 90% of the claim, with no upper limit.
Mediation of non-compulsory general insurance and pure protection contracts (term, critical illness and income protection insurance): protection for 90% of the claim, with no upper limit (currently 100% of the first £2,000 and 90% of the remainder, with no upper limit).
There will be no change to compulsory insurance, such as motor third party and employers’ liability insurance, including mediation. This will remain at 100% protection with no upper limit.
Moving on to investments, the provision currently stands at 100% for the first £30,000 and 90% of the next £20,000. From January this will change to £100% for the first £50,000.
Provision and mediation of investments: protection for 100% of £50,000 (currently 100% of the first £30,000 and 90% of the next £20,000).
Category: Financial Services Authority News, Insurance News
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