The Financial Conduct Authority (FCA) have announced their planned proposals to ban the opt-out approach of selling add-on insurance products of regulated or unregulated products offered alongside financial primary products. These add-on products include legal expenses sold with home insurance, motor breakdown or key insurance cover sold alongside motor insurance, or protection cover when taking out a mortgage or credit card.
The FCA has conducted a market study of insurance add-ons and how they are sold and their research highlighted that consumers are not always aware they have bought an add-on. The FCA has concerns that the practice of defaulting consumers into buying a product which they then have to opt out of, for example by using pre-ticked boxes to sell the consumer add-on insurance, sometimes means consumers purchasing an insurance product they may not need.
The industry will be consulted on the FCA proposals, which also include the introduction of further guidance for companies so they can provide consumers the appropriate information about add-on insurance products at the right time in the sales process.
Christopher Woolard, FCA director of strategy and competition, said in a statement that: “This is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need. Forgetting to un-tick a box at the end of a purchase is not making an informed choice.
“These proposals will mean that consumers will be in a better position to decide what they want and consider the options available to them. Fewer consumers will end up with products they didn’t want or don’t even know they own.”
Key recommendations by the FCA;
- Consumers to be provided with more appropriate and timely information that will allow them to make an informed choice on what, if any add-on products they need, and to identify the best package.
- Introduction of the most common add-ons to consumers earlier in the sales process and make it easier to compare packages of the primary product and add-ons.
- Annual price of add-ons provided to consumers rather than relying on monthly figures so that overall price to be paid is easily understood.