Consumer Panel disagrees with FSA assessment of the risks for consumers buying private medical insurance

18 December

The Consumer Panel whilst generally supportive of the FSA’s new insurance rules published today, disagrees with the way Private Medical Insurance (PMI) will be treated under the new regime and believes consumers will be put at risk.

Under the FSA’s new Insurance Conduct of Business Sourcebook , Private Medical Insurance will be in the same category as car and household insurance which are normally straightforward and easy for customers to understand. The Panel has advised the FSA that in its view, private medical insurance can be much more complex, containing unfamiliar medical terms and concepts. In addition the Panel’s own informal survey of PMI providers showed it is not always as easy to switch products as it is with other annually renewable policies. Consumers may, for example, face barriers to switching where a medical condition has arisen during the period of cover. The Panel has told the FSA that PMI products should be subject to the more detailed requirements, which other more complex insurance products such as PPI will still require, about product disclosure and suitability, to give consumers a greater degree of protection.

John Howard, Chairman of the Financial Services Consumer Panel said:

"The FSA has said that, in the move to more principles based regulation, it will maintain similar levels of consumer protection and keep rules where necessary. We believe this is an area of potential consumer detriment and the FSA has agreed to look in particular at PMI in its post implementation review to see whether this is the case."

Notes to editors

1. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status.

2. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit. More information about the Panel's work is available on this website.

3. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

4. There are currently twelve members of the Panel as listed below (for further information on individual members, see the Panel's website – www.fs-cp.org.uk)

John Howard (Chairman)
Adam Phillips (Vice Chairman)
Kay Blair
Michael Chapman
Stephen Crampton
Caroline Gardner

Jenny Hamilton
Tony Hetherington
Nick Lord
David Metz
Lindsey Rogerson
Carol Stewart