While “bad things” could occur if the Financial Conduct Authority (FCA) start playing around with commissions, advisers still expect the regulator to get rid of loaded premiums as part of its pure protection review.
There were also calls for minimum qualification requirements for protection advisers and for more insurers to include reviewable exclusions.
At a press conference yesterday, FCA executive director of consumers and competition Sheldon Mills, revealed the regulator is not ruling out banning or capping loaded premiums on protection products and admitted it ‘has concerns’ in the protection market.
In August, the FCA announced it would be conducting a review into the operation of the pure protection market including commission structures such as loaded commission.
Reflecting the live nature of Income Protection Action Week’s final day, Income Protection Task Force chairman Andrew Wibberley asked about how the FCA’s market study would affect protection in general.
Minimum qualifications for protection advisers
Jitan Varsani, director, mortgage and protection planner at FortyOne Money (pictured right), revealed he thought there would be some good, and some bad, to come out of the review.
“If it means there will be more focus on client outcomes and value for income protection, that can be really good,” Varsani said.
“I think we’re all with IPAW trying to promote the importance and build upon that.
“More governance is needed around things like advice processing possibly.
“And don’t shoot me on this, but minimum qualifications for protection advisers.”
Playing around with commissions
But Varsani maintained that while there will be some good changes, there could be some bad.
“There could be some pretty bad things if they start playing around with commissions,” he said.
“This has been a debate for many, many years. Is it right to take everything upfront? Will they put caps on percentage based commissions?
“So if you’re doing a £500 protection premium versus £1,000, should you be earning double the amount of commission for the hours you put in.”
Fellow panellist, Zoe Priselac, managing director at Way More (pictured left), said she expected loaded premiums to “definitely” be banned.
“I think for the commission, if we come back to annual reviews, you can’t sell a policy, be paid and then not speak to the client, you need to do those annual reviews.”
Reviewable exclusions
But when looking at fair value, and on income protection particularly, Priselac called for all providers to be allowing reviewable exclusions.
“When the client is at the point where that isn’t a risk anymore, we should be able to review and remove those exclusions,” she said.
“And I’d like to see more companies come back into the executive IP market. We’ve lost two and if you’re looking at competition, we need more to come back into that market as well.”