FCA To Crack Down On Optional Insurance Policies
The Financial Conduct Authority (FCA) has finally announced their plans to ban the selling of 'opt-out' insurance policies this week after the results of a market study that took place in 2014. Some of you may be wondering what exactly opt-out selling is? Opt-out selling is when a consumer is automatically signed up to an insurance policy by default when they purchase the original product they were looking for. For example, the insurer may pre-tick one or more boxes on the original form and a lot of customers will overlook these without giving it a second glance.
The FCA's research has found that this selling practice usually ends with innocent customers spending their hard-earned money on insurance policies that they didn't want or need or even knew existed in the first place (PPI comes to mind). The FCA is going to discuss this problem with the industry while offering guidance for insurers so they can give their potential customers the right information at the right time during the selling process.
Christopher Woolard, FCA's director of strategy and competition, said: "Forgetting to un-tick a box at the end of a purchase is not making an informed decision. Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give and thought to whether or not they need it. Most people will be familiar with having to double check for accidentally agreeing to buy add-on insurance when purchasing car insurance or tickets online. 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 didn't even know they owned."
This FCA ban will apply to any sales of add-on insurance on regulated or un-regulated products alike which are advertised alongside their primary counterparts. For example, this includes breakdown cover sold with car insurance and legal expenses cover sold with home insurance.
The regulator is also going to make sure that insurance firms supply their customers with the right information at the correct time to allow them to make a firm and educated decision.
James Savery, 25 March 2015