Protection  

FCA signals overhaul of £1bn insurance add-on market

The Financial Conduct Authority’s first market study has resulted in the regulator proposing a shake-up of the £1bn general insurance add-on markets.

Among the proposals is breaking the point of sale advantage for guaranteed asset protection insurance, usually offered alongside car sales.

The FCA is also proposing to require firms to explain that alternative policies are available and that better rates may be offered elsewhere, and to prevent firms from ‘pre-ticking’ boxes to tie customers in to insurance on primary products.

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A general insurance add-on is an insurance product that is sold alongside goods or services, such as bank accounts, other insurance products or retail products such as consumer electronics.

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.

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.”

The FCA is asking for comments on its proposals by 8 April 2014.