Financial Conduct Authority rules on insurance could cut trusted advisers out of the loop and give clients a poorer deal on private medical insurance, an expert has warned.
James Parker, chief executive of specialist private medical insurance (PMI) provider CS Healthcare, has called on the City watchdog to exclude PMI from new rules on general insurance.
He said the rules, outlined in Policy Statement PS16-21, 'Increasing transparency and engagement at renewal', will cost consumers more than just their money, while undermining the role of insurance brokers.
The new rules, which are set to come into force in April 2017, have been created to encourage general insurance clients to shop around when their insurance policy is due for renewal.
However, for advisers working within the PMI market, this sort of encouragement could cost customers dearly, as not only will the client be sent reminders directly from the provider when their policy is up for renewal - cutting out the adviser - but also the complicated nature of PMI could mean customers get a poor deal.
Mr Parker explained: "What might seem sensible advice on the face of it could well cost consumers dear.
"Medical insurance premiums have been rising for some years now, so it is understandable that many policyholders become focused more on the price of cover and the savings they can make by moving to an alternative insurer, than the features of the policy they are being offered or the quality of cover they may be giving up."
He commented that, if these rules come into play without PMI being excluded, there was a "very real risk that consumers will be driven away from their trusted adviser".
They could end up in the hands of a less scrupulous adviser or even with no advice at all.
Mr Parker added: "Without adequate explanation they could well be sold a new ‘moratorium’ product – where no declaration of their medical history is required – and in making such a switch lose the cover they have enjoyed for their pre-existing conditions, for good, incurring at the same time new medical exclusions.
"Others may simply search for a more competitive premium online and buy into a product without taking advice as to its suitability, and having the wrong kind of cover really isn’t where you want to find yourself when it’s your health that’s at stake.”
PMI rates are usually driven by claims experience, rather than the price of the policy or cover. So enforced shopping around in the PMI market might push up costs for insurers, brokers and the end consumer, which would be to the detriment of all parties.
Mr Parker added: "The new rules are very unhelpful at a time when our focus as an industry should be on opening new markets, and growing the numbers with private healthcare provision.”