The Government has announced plans to develop a simple, non-advised income replacement product to protect customers who have lost their income due to sickness.
The Simple Financial Products Steering Group, set up by the Treasury back in October and led by former FSA director and Lloyds Banking Group Chief Risk Officer Carol Sergeant, has confirmed further analysis is required before launching this product. However it has recommended such a product is based on the age of the applicant with deferred period of between four to 52 weeks offered.
However the plans have set several alarm bells ringing within the industry with fears a non-advised service could lead to customers ending up with a policy that is not suitable to them and their situation, similarly to those who were mis sold payment protection insurance.
Payment protection insurance was taken out with a loan or credit card under the guise it should protect customers who are unable to work, either due to redundancy, through illness or after having an accident, and meet their monthly repayments.
However many policies were mis sold to customers who could not use, did not want or were not even aware they had.
Banks have now set aside around £10bn to reimburse customers mis sold PPI.