Mortgage watchdog director Monty Burn is launching a national campaign in October to have the single premium accident sickness and unemployment (SP ASU) policy abolished.
Burn's campaign is targeting agents who mis-sell the five-year policies and bring the industry into disrepute. "By rewarding advisers who sell SP ASU's to unsuspecting clients, these rogue companies are growing from strength to strength," he said.
Burn said that some SP ASU policies worked out to be more expensive than monthly policies.
He said there was also the option to add the single premium to mortgages, which meant the equity would decrease every five years when the SP ASU was paid.
There would then be a shortfall at the end of the mortgage repayment if an insufficient endowment policy was in place.
Bennett Gould & Partners is a major player in the ASU market and director John Plackett confirmed that the SP ASU is open to mis-selling. "There are cowboys out there," he said. "In essence the product is good, but it depends on how it is sold."
Plackett said the single premium was not always added on to the mortgage and he suggested it was often better to take out a small loan to pay the policy.
Plackett said he hoped there would be more stringent guidelines for SP ASU policies once regulation is tightened up between General Insurance Standards Council (GISC) and the Financial Services Authority (FSA).
A spokesman for the Association of British Insurers (ABI) said that although the SP ASU is not as common as it used to be, it is important to understand how the single premium is being financed.
