It is “essential” that everyone involved in the protection industry engages with the Financial Conduct Authority’s protection review, according to guests on the FT Adviser podcast.
The Financial Conduct Authority announced a review into the protection market which will examine how products are sold as well as the use of commission arrangements.
The review follows the authority’s concerns that the design of commission arrangements may not allow firms to deliver good outcomes to policyholders.
Therefore, in order to understand how the market is working, the FCA will explore consumers’ engagement with, and understanding of, the protection products they are buying.
Protection Guru founder, Ian McKenna, argued the protection industry should fully engage with the FCA to ensure the effectiveness of the review and avoid any negative consequences.
McKenna warned that, if there is an over focus on commission, the review could have disastrous effects on the protection market.
“I really hope they learn from mistakes in other countries like the Netherlands and Australia where, with the best of intentions, the regulators have seriously damaged the number of advisers in the protection market and the number of consumers protected,” he said.
“I wouldn’t want to see the FCA do the same to the UK.”
Similar concerns were shared by CIExpert director, Alan Lakey, who said: “If we find ourselves in a situation where the protection industry is made to feel that it's not a profitable area to be in for advisers and for insurers then we are going to find ourselves in a very small, polarised area where two or three large players can dominate the market.
“That is no good for anyone.”
You can listen to the full podcast episode by clicking on the link above.