The cancellation period for payment protection insurance will be extended from 14 days to 30 days as part of a radical shake up of general insurance rules by the Financial Services Authority.
The change is one of a number of changes proposed in a consultation paper today to the sale of protection products to improve sales practices where customers are losing out.
Other measures include a new standard to ensure balanced oral disclosure to help consumers make informed purchasing decisions.
The products covered in the FSA’s consultation paper include payment protection insurance, critical illness cover, income protection and term assurance
Following the consultation, the new general insurance regime is likely to come into effect in January 2008 with firms being allowed a transitional period for implementation.
A differentiated approach to Insurance Conduct of Business regulation is at the heart of the proposals, which marks a significant step forward in the FSA’s move to more principles-based regulation.
For general insurance business, such as household, motor or pet policies, this means moving to principles and high-level rules, except where detailed provisions are required by European Union directives or in a small number of cases where they are the only practicable way to protect consumers.
While this will mean more flexibility for firms, the FSA will require the same standards of conduct and essential consumer safeguards to remain.
Dan Waters, director of retail policy, says: “Following our recent radical overhaul of the investment conduct of business rules, today’s announcement is another big step towards more principles-based regulation.
“All the evidence suggests that consumer detriment varies a lot according to the type of insurance product involved.
“And it is right we should now move to a differentiated and principles-based regime for general insurance where the focus is on outcomes for consumers rather than processes within firms.”