From 1 April 2016, UK financial services firms will no longer be able to use opt-out methods as a means of selling “add-ons” to customers purchasing regulated financial products including insurance. The rules apply to all add-on products (regulated and unregulated) which are sold alongside financial products examples include breakdown cover sold with motor insurance. The FCA has issued new guidance on general insurance add-on sales with a deadline of 30 September 2016 for compliance.
A market study commissioned by the FCA found that customers were “overpaying for add-ons by as much as £108 to £200m per year”. The changes are therefore aimed at “improv[ing] competition in the market around add-on sales and prevent[ing] the exploitation of customer biases, which can lead to customers purchasing products they do not need and overpaying for these products”. The intention is that this will encourage customers to take a more informed approach in deciding which products to purchase.
The policy statement issued by the FCA confirms that the rules will not apply retrospectively but that firms must not make it “unduly difficult for customers to elect not to renew these add-ons”. Indeed, on renewal firms will need to take reasonable steps to ensure that customers are aware of the products they were previously sold on an opt-out basis before the rules were in force.