CETA said free period deals offered poor value for money over the on-risk period of the policy and undermined clients who wished to buy suitable protection products.
David Quick, managing director of CETA, stated the regulator was likely to act due to the high incidence of cancellation following the free period, which suggested unsuitable policies were being sold in the first instance. He warned that any broker selling a policy which paid commission during the free period could face an investigation of their sales processes by the FSA.
He added: “The simple fact is these so-called ‘free’ periods are not free – the cost is merely deferred and they quickly become very expensive. The payments in the months following the ‘free’ offer period are far higher than is available by shopping around for the same level of insurance cover.”
Kevin Carr, spokesman for LifeSearch, backed Quick’s comments. He added: “Clients often place gimmicks higher than suitability, which is far more important. If the FSA does look into it, then I think these policies will disappear, but it will take years, not months. The whole premise is insurance is bought, not sold, and we need to convince consumers that protection insurance is important. There are better ways to do that than utilising gimmicks.”
