Michael Folger, Director, Conduct of Business Standards, said:
“The LTCI market is relatively young though with an ageing population, there is considerable potential for it to grow. These changes represent a major step forward in strengthening and extending safeguards to provide protection for consumers, who then buy these products to protect themselves at a time when they are likely to be at their most vulnerable.”
In developing its proposals, FSA has aimed to ensure that:
* Consumers who buy products designed to help them fund the costs of long-term care will receive the same level of protection whether they are insurance-only pure protection products or investment-based products (e.g. immediate care annuities or LTCI bonds).
* LTCI advisers recommend to consumers the products that match their needs and circumstances. This will be achieved through advisers meeting regulatory requirements, covering matters such as suitability and ‘know your customer’ and through enhanced training and competence requirements. There will be an approved examination on LTCI to new advisers to reduce risk of consumers receiving bad advice.
* Firms provide consumers with relevant pre- and post-sale information and risk warnings to help them make informed choices on the type of product and amount of cover they need. For example:
firms will be required to provide customers with clear information about the key features of an LTCI product including whether premiums are subject to review.
Firms who sell LTCI-linked investment bonds will be required to send customers annual statements to keep them informed about the performance of their bond and to encourage them to review performance annually to assess whether the product is on track to meet their funding needs.
* Firms treat consumers fairly and promptly at the point of claim.
* Consumers with an eligible complaint about any LTCI product will have access to the Financial Ombudsman Service.
* Consumers with a valid claim against an insolvent firm about any LTCI policy are protected by the Financial Services Compensation Scheme.
The FSA proposals have been drawn up after extensive informal discussions with the industry and market specialists and analysis of detailed market data carried out for the FSA by KPMG.
The FSA are also publishing a consumer factsheet on LTCI which is designed to improve public understanding of these complex products. The factsheet is available from the FSA Consumer Helpine on 0845 606 1234.
The proposed new requirements would come into force on 31 October 2004.
