Caroline Muspratt says consumers and insurance companies could lose out if the FSA makes insurance sales too complex

Buying car insurance isn't rocket science. It's easy for consumers to shop around for quotes themselves and once they have chosen the policy – a decision which is usually based on price – they feel comfortable that they understand the cover and any limitations.

When it comes to critical illness cover, the consumer is more likely to rely on a broker to find the best deal, and more importantly, explain exactly what is covered and what is left out. Even then, many people find they come unstuck when they try to make a claim, for instance because an illness they believed was covered is actually exempt.

So it is easy to understand why the FSA wants to potentially split its regulation of insurance into two categories and apply tougher rules to the sale of protection products than it does to other general insurance products.

In an interim report on its insurance conduct of business regulation, the FSA said it intended to move towards a more "principles-based and proportionate approach". But while there are some clear benefits to the consumer, the insurance industry is right to be a little more cautious.

Many insurers and brokers do feel the industry is over-regulated, at least in terms of the more "straightforward" products, and this regulation costs money which is passed on to the consumer with little discernible benefit.

Loosening the rules around motor and household insurance, particularly over the amount of information that must be disclosed, is likely to reduce costs and as a result prices, but the FSA will need to ensure that consumers still have the same level of protection.

Tightening the rules around products like critical illness cover and payment protection insurance will most likely mean an additional cost for intermediaries, but this does not automatically mean the customers will benefit. Requiring brokers to give more pieces of paper to the customer does not necessarily mean the customer will bother to read or understand them. So the FSA's consultation with the industry this summer will need to take this on board and perhaps look at ways to educate the consumer, as well as changing the regulation of the industry.

Furthermore, while many customers may review their motor or household insurance policy each year when it comes up for renewal, fewer bother to shop around for critical illness or life cover. This may well be due to the fact that these products are seen to be more complicated and customers are either complacent or lazy. But if the FSA tightens the rules and that means more disclosure is required, this could put people off browsing for a new quote due to the sheer amount of information they will be faced with. As a result, they will be stuck with a policy which perhaps isn't the best suited to them, or they are paying over the odds without realising.

And to an extent, if buying protection products appears to be more time consuming and complicated than it already is, some customers will be put off buying a product altogether.

The FSA needs to make sure that, while it has the consumer's best interests at heart, it is not shooting itself, or the insurance industry, in the foot, by making the sale of protection products unnecessarily complicated or expensive. IT