RDR: FSA mulls pure protection crackdown

The FSA says it fears some firms may focus more on sales of pure protection policies to maintain a commission income post 2012.

It says such a shift could lead to consumer detriment, adding it will "review closely" whether it needs to change its regulatory approach to pure protection markets.

In today's RDR Consultation Paper, it asks if any consumer detriment would arise if it implemented the RDR proposals for the sale of retail investment products and took no action on regulating the sale of pure protection products.

"Were there to be no change in the regulation of sales of pure protection products by retail investment intermediaries, this could act as an incentive for some firms to shift their sales focus to pure protection products," the paper reads.

It says an increase in numbers advising on and selling pure protection is not a concern in itself, but that a shift in focus that did not reflect clients' needs is.

"Our initial view is that unless we act to limit potential material risks to consumers, potential distortions in advice relating to pure protection products may arise," the paper adds.

But it says it is not bringing forward any proposals for the sale of pure protection products at this stage.

Investment intermediaries can elect to sell pure protection products under the COBS or ICOBS rules.

Research issued by the regulator in February this year showed almost 1,500 investment advice firms also advise on all three pure protection products - critical illness, income protection and life cover.