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CETA Insurance have accused the Financial Services Authority (FSA) of failing to “draw a clear distinction” between “expensive loan and credit card protection” and the kind of decreasing term life insurance, sometimes known as mortgage protection, which protects policyholders against the eventuality of repossession.

The accusation comes at a time when the Office of National Statistics say that unemployment is on the rise and credit crunch is tightening purse strings across the UK, meaning that more and more families’ homes are at risk.

Managing Director of CETA, David Quick, believes that high profile investigations by the FSA have encouraged many consumers to shun decreasing term life insurance in the mistaken belief that cover is neither competitively priced nor effective.

He commented, “We have repeatedly warned that the FSA should draw a clear distinction between competitively priced MPPI and the expensive loan and credit card protection that generated huge profits for banks and retailers."

“Now the housing bubble is bursting and repossession orders soaring, many are likely to lose their homes because they were led to believe they should avoid ‘rip off’ MPPI cover. The FSA’s lack of clarity may have the effect of turning a crisis into a disaster.”

The FSA deny any ambiguity in their approach to drawing a clear line between types of mortgage protection decreasing term life insurance and “expensive loan and credit card protection”, commenting, “We’ve always said that PPI can be a worthwhile product for certain people.

“The changing economic condition does not affect our approach because we are concerned about those customers who would not have been fully covered by the policies they were sold, and therefore would not be effectively covered if they were made redundant.”