BBC News
watch One-Minute World News
Last Updated: Wednesday, 19 December 2007, 11:07 GMT
Warning about medical cover rules
The door of the Financial Services Authority
The FSA's new insurance rules will take effect in January 2008
Simplifying the rules for selling medical insurance will put consumers at risk, a consumer body has warned.

New rules from the Financial Services Authority (FSA) place private medical insurance (PMI) in the same category as car and household insurance.

The FSA says these markets "generally" work well, and therefore less onerous rules are appropriate.

But the Financial Services Consumer Panel believes the complexity of PMI requires more detailed regulation.


The FSA has published its new Insurance Conduct of Business Sourcebook, which sets out the standards and requirements for the way general insurance firms deal with their customers.

We believe this is an area of potential consumer detriment
John Howard, FSCP
As part of the regulator's move towards more so-called "principles-based" regulation, it has removed detailed rules about the sale of certain products such as household, medical, motor and pet insurance.

It says the market is already serving consumers well in these areas.

At the same time, it has tightened up the requirements in other parts of the insurance market where it believes customers are not being treated fairly.

"We have greatly simplified our rules in areas of general insurance markets where outcomes for consumers are generally good," said FSA director of retail policy Dan Waters.

"In a few areas, however, like payment protection insurance, we have responded to continuing market failures and consumer detriment by introducing carefully targeted rules to help ensure that consumers achieve a fair deal," he added.

Complex terminology

The Financial Services Consumer Panel (FSCP), which advises the FSA on consumer issues, said whilst it was "generally supportive" of the new rules, it disagreed with the regulator's classification of private medical insurance.

The panel believes that the unfamiliar medical terms and concepts contained in PMI mean it is much more complex than the other types of insurance in the same category. Its own research also suggests consumers sometimes struggle to switch providers.

It therefore wants PMI to remain subject to the more detailed regulations which will apply to products such as payment protection insurance.

"The FSA has said that, in the move to more principles based regulation, it will maintain similar levels of consumer protection and keep rules where necessary," said FSCP chairman John Howard.

"We believe this is an area of potential consumer detriment," he added.

The FSA acknowledged that the medical terminology found in PMI products was complex, but said many policies used standard terms and conditions which helped to reduce the risk of choosing less suitable cover.

It said it would check for any potential harm to customers after the new rules take effect in January 2008.

The FSA has also published its plans for the regulation of travel insurance sold alongside a holiday, known as connected travel insurance (CTI).

It already regulates stand-alone travel insurance bought directly from firms, and from January 2009, the same rules will apply to CTI.

The consumer group Which?, which has campaigned on the issue for many years, hailed the move as a "victory for consumers".

Net giants test web health
24 Oct 07 |  Technology
New advice on payment protection
04 Oct 07 |  Business
Protecting your income
16 Jul 07 |  Business
Warning over loan insurance costs
01 May 07 |  Business
Travel insurance to be regulated
26 Jun 07 |  Business

The BBC is not responsible for the content of external internet sites

Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit


Americas Africa Europe Middle East South Asia Asia Pacific