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FCA set to ban opt-out selling with insurance

The FCA has announced plans to ban ‘opt-out’ selling where consumers are automatically sold a product that they have to opt out of at a later date.

Following a market study into the general insurance add-ons industry last year, the regulator found that opt-out selling often results in consumers purchasing an insurance product they do not need. In some cases, consumers are not even aware that they have bought an add-on.

The ban would apply to any add-on sales of regulated or unregulated products offered alongside financial products, which includes: legal expenses sold with home insurance; breakdown or key cover alongside motor insurance; and protection when taking out a mortgage or credit card.

The FCA has also proposed offering guidance to help firms provide appropriate information to assist customers in making an informed decision. 

The regulator will consult on both the ban and the proposed guidance until 25 June.

FCA director of strategy and competition Christopher Woolard says: “This is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need. 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 they need it. 

“We are all familiar with having to double-check whether we have accidentally agreed to buy an add-on insurance product when buying car insurance or tickets online, for example.

“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.”

Berkeley Alexander managing director Geoff Hall says the regulator’s stance should come as no surprise.

He adds: “The FCA’s proposals will significantly impact two areas: extensions to the ‘main policy, and additional add-on policies sold alongside a main policy (so a separate policy with a separate insurer). 

“What these proposals are not likely to impact is protection products like IP or ASU. 

“Surely no one is selling IP or ASU on an opt-out basis any more – that’s what the whole PPI issue has been about in the past few years.”

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