John Bridgeman, Director General of Fair Trading, has warned that health insurers must give customers more information about their policies and introduce simple products or face a crackdown by the Financial Services Agency, the industry's regulator.

Insurers blasted

The Office of Fair Trading criticised insurers for failing to act on recommendations it made in a report almost two years ago.

Mr Bridgeman said: "The response of this £2bn industry to recommendations in my 1996 report was dismal. Most of the recommendations sought the industry's involvement in improving self-regulation but the response, on the whole, was negative.

"Health insurers have not shown much concern for improving the information, choice and service to their consumers."

Medical insurers face their own health check

The Office of Fair Trading has urged health insurers to draw up a code of practice clearly defining their products to enable customers to easily compare the policies on offer.

If they fail to respond to its recommendation by September 30 it said it would call for stronger regulation from the Financial Services Authority.

Tighter regulation

The OFT has also called for tighter regulation for moratorium underwriting.

This is where customers are not required to make a medical declaration or to undergo an examination before purchasing a policy but are then not covered for any pre-existing medical conditions for a certain period.

Insurers have been criticised for not making the terms of such policies clearer.

The OFT urged insurers to warn customers of likely increases in premiums before products were sold.

Rises in the price of policies have comfortably outstripped inflation over the last few years.

Peter Jacobs, chief executive of BUPA, the private healthcare group, defended the sharp rise in prices.