Since 31 October 2004 advertising, advising on and selling long term care insurance products has been regulated by the Financial Services Authority.
Topic: Financial services
Who: The Financial Services Authority
Where: The UK
When: October 2004
What happened:
With effect from 31 October 2004, the Financial Services Authority introduced changes to its misnamed and humungous "Handbook" to give greater protection to those contemplating the purchase of Long Term Care Insurance ("LTCI").
Although the size of the LTCI market remains small (around 46,000 policies are currently in force) it is one in which consumers are particularly at risk if not properly informed and advised. The new rules are introduced to ensure that customers have an enhanced level of protection through FSA Regulations covering issues such as the suitability of financial advice, product information, financial promotions, disclosure of charges and cancellation rights.
The new rules apply to all long term care insurance products, both insurance only pure protection products and investment based products, such as immediate care annuities or long term care insurance bonds.
Main FSA, LTCI ad changes
In the context of advertising for these products, the principal amendments effected by the "Long-term care insurance contracts instrument 2004" are to the Insurance Conduct of Business source book. These require firms offering general insurance contracts providing benefits for customer care in the event of the customer's disability or incapacity to avoid using terms which state expressly or impliedly that the policy will be available for the customer to claim on in the long term, that is for any period beyond the expiry of the policy.
In other words a general insurance contract should not be promoted as being capable of providing long term care insurance for the customer in the long term and expressions such as 'long term care' and 'lifetime care' should generally be avoided.
Furthermore, if a general insurance contract provides benefits over the long term in the event of a claim being made, the firm should make clear that the long term aspect relates only to the availability of benefits in the event of a claim, not to the duration of the policy itself.
Why this matters:
Long term care insurance products were first marketed in the UK in the early 1990's. More than 90% of them are distributed by independent financial advisers, but there has clearly been concern around the way in which these policies are promoted and advised upon. Clearly, however small the market sector, the catchment is by definition vulnerable and the bringing of advertising, sales and advice in this area under the FSA remit seems a sensible and prudent move.
Those promoting products of this kind should ensure that they not only have proper authorisation but are following the requirements of the new instrument in their advertising.
