UK: Financial Conduct Authority Finds Insurance ‘Add-On’ Market Is Not Competitive


    The Financial Conduct Authority (FCA) published yesterday, the results of its market study into general insurance ‘add-on’ products. Add-ons are sold alongside or on the back of ‘primary products’ such as travel insurance sold with a flight, or mobile phone insurance sold with a mobile phone.

    The report concluded that competition in the market for general insurance add-ons is not effective, and that consumers are significantly overpaying when they purchase products as add-ons. The FCA has described this as a ‘clear case’ for it to intervene in the supply of general insurance add-ons and stated its intention to:

    • Ban ‘opt-outs’ or pre-ticked boxes for the sale of add-ons;
    • Prevent the sale of Guaranteed Asset Protection at the same time as the sale of a car or car finance, permitting it only at a later date; and insisting on information about alternative policies being provided to a consumer if the product is offered at the point of sale;
    • Require firms to publish claims ratios to highlight the FCA’s belief that add-ons are poor value for money; and
    • Improve the way add-ons are offered through price comparison websites.

    The Association of British Insurers (ABI) has attacked the methodology used by the FCA – which drew wider conclusions from a study of five distinct add-on markets. The ABI also disagrees with the FCA’s conclusions, stating that the emphasis upon claims ratios is unhelpful, as they are not an accurate benchmark of customer value. It did, however, welcome the renewed focus on price comparison websites in providing good information to customers about the add-ons offered. Click here to read the comments of the ABI’s Director of Regulation, Hugh Saville.

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