Biba is urging the FSA not to "go soft" on de-linking the sale of payment protection insurance (PPI) from other financial products.
It is understood there has been strong lobbying from banks, loan companies and insurers within the creditor market who want to see it remain as a linked or "bundled" sale. Their argument is that de-linking will lead to a drop in sales, which could mean more people go into debt or are forced to claim benefits if they are without cover.
It is known that the FSA requested a copy of a presentation from Norwich Union's director of creditor distribution, Kenny Leitch, who spoke recently at an industry event on de-linking, and that it may have been influenced by this.
Cathy Thomas, creditor development manager for Norwich Union, said: "It is too early to de-link, although this may be possible in a few years. In PPI there is less awareness of risk and it is less demand driven. If it is de-linked, there will be increased risk s and less consumer protection for some customers."
There are now fears the FSA will merely require evidence of better sales practices in the sector, rather than impose a major overhaul.
After meeting with representatives from the sector's trade bodies last week to find out their proposals for cleaning up the market, the FSA stated: "It was agreed that conclusions could not be drawn at the moment."
Eric Galbraith, Biba's chief executive, said: "By enforcing this [de-linking], the FSA will address competition. We want to make it clear that PPI can be a valuable product but consumers need to know they can buy it separately."
Galbraith said there was evidence that linked-sale PPI was often worse value than when sold independently.
He said Biba would continue to raise the issue with the Office of Fair Trading, which was focusing on de-linking in a study to be produced at the end of the year.
Cardiff Pinnacle's Steve Devine, who is chairman of PPI providers' association Protect said: "We know Biba is in favour of de-linking. This sounds great in theory, but if it is not sold linked in, people don't buy it. This is why Norwich Union stopped selling it as a stand-alone product. You also get problems with adverse selection if it is sold as a stand-alone product."