David Quick, managing director of CETA, said it understands from a source close to the FSA that the regulator is concerned about companies selling MPPI insurance to customers who may not be able to make a claim under the terms of the policy.
Quick explained in many instances, mis-selling is fuelled by the unrealistic setting of sales targets, but in some cases brokers have also been unwittingly selling inappropriate policies to clients who do not need the type of cover on offer.
“For example, it is not uncommon for government employees to be entitled to full pay for six months if they fall ill.
“An appropriate MPPI policy for such a client, taking into account their needs and circumstances, would provide back-to-day-one cover for unemployment and a 180-day deferment period for accident and sickness.
“For a broker to sell an ‘off the shelf’ MPPI policy is a clear case of mis-selling,” Quick said.
He added: “Many brokers who have been selling ‘one size fits all’ policies in the past are often unaware of the dangers of continuing to sell them in the future.
“Unfortunately, most general insurance sourcing systems cannot tailor MPPI policies to meet a client’s specific demands and needs, which has only exacerbated the problem.”
Simon Chalk, mortgage planner at Mortgage Portfolio Services, said: “The FSA, government and CML are concerned about the lack of take-up for MPPI, and are trying to ensure sales are higher.
“But it is right to say it can be mis-sold and that the FSA is taking a look at this. This is all well and good but it is also up to the industry to develop the right products in the first place to meet all clients’ needs.”
