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FCA proposes insurance add on shake-up

Ryan Fowler

March 11, 2014

The shake-up will include banning pre-ticked boxes, forcing firms to publish claims ratios and breaking the point of sale advantage for guaranteed asset protection insurance, usually offered alongside car sales.

Christopher Woolard, director of policy, risk and research at the FCA, said: “There’s a clear case for us to intervene.

“Competition in this market is not working well and many consumers are simply not getting value for money. Firms must start putting consumers first and stop seeing them as pound signs.

“We believe our proposals will address these issues and prevent consumers paying for poor-value insurance products that they may not need or use.”

A general insurance add-on is an insurance product that is sold alongside goods or services (e.g. a car or holiday) or other principal insurance products such as home insurance.

Given the perceived problems in the market, the FCA announced a market investigation in July 2013. It found poor competition, low levels of claims and consumers potentially being overcharged by up to £200m each year for products that they may not need or even use.

The FCA analysed detailed evidence about firms and consumers in the travel, gadget, GAP, home emergency, and personal accident add-on insurance markets.

The FCA reviewed the experiences of over 1000 consumers and carried out behavioural research to understand if buying decisions are affected by different sales tactics. The FCA also reviewed product literature, sales, pricing, profitability, and claims.

The market study into general insurance add-on products is the first of its kind by the FCA. In future, these studies will form the mainstay of how the FCA gathers evidence to assess competition problems, and where it can intervene to promote better outcomes for consumers.


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