The crisis in protection

The great British public is under-insured. Perhaps unsurprisingly, the insurance industry has been sending this message out for many years. As the first year of “full” general insurance regulation comes to a close, the message from the FSA seems to be that consumers have much to keep clear of, at least in the twilight zone of “personal” insurance that lies between mortgages, debt and other lifestyle protection. The regulator has already found serious problems with two of these products: critical illness and payment protection insurance. A broader review of the effectiveness of the regulatory regime is due next year. It has now issued a Dear CEO letter to firms complaining about the quality of policy summaries. In the meantime , Adam Samuel looks at what’s wrong with the sector.

Many of the difficulties discovered with general insurance are symptomatic of broader problems with the insurance market as a whole. They start with the way the contract is drafted and presented. The fact that Lloyd’s is struggling to achieve contractual certainty in its commercial sphere typifies some of the major structural problems the whole insurance market has in producing an agreement to which the parties can safely agree.