The Financial Conduct Authority has today (25 March) announced plans to ban opt-out selling in financial services, following a market study last year.
Opt-out selling is 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.
The FCA found that the selling method often results in consumers purchasing an insurance product they do not need or are even aware of buying.
The regulator will consult with the industry on the proposals which also include introducing guidance for firms so they can give consumers information about add-ons at the right time in the sales process.
Christopher Woolard, director of strategy and competition, commented that forgetting to un-tick a box at the end of a purchase is not making an informed choice.
“Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give any thought to whether or not they need it,” noting that most people will be familiar with having to double check for accidently agreeing to buy an add-on insurance when getting 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 don’t even know they own”
The ban would apply to any add-on sales of regulated or unregulated products offered alongside financial primary products, including legal expenses sold with home insurance, breakdown or key cover sold alongside motor insurance, or protection cover when taking out a mortgage or credit card.
The FCA also wants firms to provide consumers with more appropriate and timely information that will allow them to make an informed choice on what, if any, add-on products they need.
The guidance encourages firms to introduce 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. It recommends that firms give the annual price of add-ons rather than relying on monthly figures.
The consultation period ends on 25 June.