16 April, 2003: Legal and General (L&G) say labelling critical illness (CI) cover as a ‘higher risk’, which has been proposed by the FSA, could lead to as many as 116,000 fewer homeowners a year being able to pay off their mortgages.
The company estimates this is the number of homeowners each year that will suffer a critical illness during their mortgage term but not have such protection in place if the proposal in the FSA’s CP160 and CP174 consultation papers is carried through.
The ABI says annual sales of CI policies have increased from 600,000 in 1999 to 1.2m in 2002 and around 60% of sales are to protect mortgages.
The increase has happened since 2000 largely because mortgage advisers have been able to sell term assurance and critical illness cover under the ABI code encouraging more of them to include these products as part of the advice offered to customers.
L&G said if the FSA makes it harder for these advisers to see CI then they won’t promote it as a valuable addition to the basic mortgage protection.
This will leave large numbers of homeowners and families inadequately protected.
It says statistics indicate that more than 700,000 homeowners a year could miss out on advice about critical illness cover as a result of the FSA’s higher risk definition.