The Financial Services Authority is to increase the compensation limits for insurance, investment and home finance advice business in the event of a firm failing.
Jon Pain, managing director of retail markets at the FSA, says: “The changes will help consumers understand and have confidence in the protection provided by the FSCS. In particular it removes the current potentially confusing provisions under which some parts of a claim can be paid out at 100% and other parts at 90%.”
The changes, which come into effect from 1 January 2010, mean the compensation limit for investments, home finance advice and deposits will be the same at £50,000 and all claims for non-compulsory insurance will be paid at 90%, with no upper limit.
For advising on or arranging house purchase finance there will be protection for 100% of £50,000 (currently 100% of the first £30,000 and 90% of the next £20,000).
Foe non-compulsory insurance provision (both general and life insurance consumers will get protection for 90% of the claim, with no upper limit (currently 100% of the first £2,000 and 90% of the remainder, with no upper limit).
Mediation of non-compulsory general insurance and pure protection contracts (term, critical illness and income protection insurance): protection for 90% of the claim, with no upper limit (currently 100% of the first £2,000 and 90% of the remainder, with no upper limit).
There will be no change to compulsory insurance, such as motor third party and employers’ liability insurance, including mediation. This will remain at 100% protection with no upper limit.