The findings of this work have been published in the latest FSA Financial Promotions Bulletin which can be accessed here:
http://www.fsa.gov.uk/pubs/newsletters/fp_bulletin3.pdf
Critical illness insurance products are often considered higher risk due to the complexity of the product, the scale of the likely financial benefit and the comparative vulnerability of the customers. These concerns, coupled with press comment that consumers may misunderstand the nature and scope of critical illness insurance prompted the FSA's Financial Promotions Monitoring team to examine promotions of 25 firms.
This work revealed unsuitable tactics such as:
* Use of scaremongering – particularly where not all forms of the disease in question will be covered by the policy even though they are included in the statistics;
* Unsubstantiated claims made, for example about price, uniqueness and coverage;
* Giving the overall impression that critical illness cover is simple - in fact, policy definitions and exclusions mean that critical illness products are rarely simple;
* Implying that critical illness cover is equivalent to income protection - this is not true unless it is a composite product and this is explained clearly in the promotion, as critical illness cover on its own just provides a lump sum and is not a replacement for regular income;
* Promotions that give the impression that the payout will cover all expenses related to a critical illness even if the policy does not extend to this (a lump sum may not replace income, or cover medical care and house alterations, for example);
* Key terms and conditions or exclusions were not made prominent enough in brochures – such as reviewable premiums, benefits payable once, the exclusion of pre-existing conditions, premiums payable throughout the claims process, non-disclosure of material facts, own-fault and survival periods.
The FSA's focus financial promotions is just one aspect of the ongoing work it is undertaking on critical illness cover. Other initiatives include reviewing product disclosure documentation, such as policy summaries and keyfacts documents, to see whether they comply with FSA rules. The regulator is also examining the way in which critical illness and payment protection products are sold during the mortgage sale process as part of the thematic work it is doing on payment protection insurance.
For further information on the FSA's financial promotions work, please access the FSA website here:
