Insurance companies must increasingly analyse the risk profile of their products from a customer's perspective according to consultants Watson Wyatt.
Insurers need to learn lessons from the recent FSA fine of Lloyds TSB, said the company. It warned that pointing out the risks in product literature might not be sufficient, following the FSA's ruling.
Lloyds TSB was fined for the mis-selling of its high-income bond, Extra Income and Growth Plan (EGIP). Watson Wyatt said while the EGIP was not an insurance contract, many of the principles involved could be applied to insurance products.
Watson Wyatt said insurers should carry out a detailed risk analysis from the customer's perspective for each policy they sell.
Insurers should also ensure that risk warnings in product literature are consistent with the product's risk profile. Comprehensive suitability profiles should be used to monitor actual sales, said Watson Wyatt.
