On 28 September 2015, the  Financial Conduct Authority (FCA) published a policy statement (PS15/22) following its consultation, in March 2015, on whether the competition in add-on markets was effective and whether this impacted on consumer outcomes. 

Background:

The FCA’s consultation proposed a shake-up of the £1bn general insurance add-on market where the FCA’s 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."

Policy Statement:

Following on from the consultation, the policy statement noted that the competition for add-ons was not effective which in turn has had a negative impact on consumer outcomes. PS15/22 confirms the final rules and guidance relating to general insurance add-ons and improving the information that is provided to customers. 

The FCA have stated “We believe that there is more firms could do to better meet our regulatory requirements when selling add-ons. We expect that firms should already be working towards delivering appropriate and timely information for add-on sales. We expect firms to have made the necessary changes to their sales journey by 30 September 2016.” 

Findings:

  • Insufficient information provided about the cover and/or price which affects the customer’s ability to assess the options and to choose the right product for their needs.
  • The timing of when add-ons are introduced in the sales journey has a profound effect on consumer decision-making. 
  • Information is not provided in a way that enables the customer to easily compare packages i.e. the primary product and any add-ons. 
  • The way the price is ‘framed’ e.g. only monthly prices displayed, can result in consumers not understanding the ‘real’ price of the add-ons, or the overall package.

Firms should: 

  • Provide appropriate and timely information to customers so they can make an informed decision when purchasing the product.
  • Provide information about the most common add-ons when required and to monitor these accordingly.
  • Demonstrating good practice in helping customers compare packages of primary product and add-ons, and to make comparisons of packages easier, with a clear price for the whole package given.
  • Displaying the annual price of add-ons (as well as monthly) to ensure the customer can adequately understand the overall price of the add-ons.
  • Ensure pertinent information on the features, benefits, exclusions, terms and price is provided as required.