The Financial Conduct Authority ("FCA") has recently upped its scrutiny of insurance add-ons. There has been heightened speculation in the market that regulators are starting to contact brokers in relation to this. The chief executive of the FCA, Martin Wheatley, has commented that firms must be seen to get their houses in order to avoid any regulatory action. The regulator became aware of the mis-selling of add-ons following the investigation into motorists’ legal protection insurance. This probe has since taken off as its own separate study. A spokesperson for the FCA commented that the regulator does not support when customers are forced to opt-out of buying a product and is thus encouraging firms to switch to an ‘opt-in’ policy. The FCA has stated that brokers need to provide clear information and ensure that all customers are aware, at the point of sale, that the add-ons are optional and also available elsewhere. This level of scrutiny into the sale of add-ons reflects the ‘consumer-interest’ approach that the FCA has adopted.

The study into the market of general insurance products was initially launched by the FSA at the beginning of 2013. The scope of the review was wide, looking at products sold as add-ons to either an insurance policy or another financial services product or purchase, such as a car. The idea behind the review was to see whether there were common features of the add-on markets, which could weaken competition and lead to poor consumer outcomes.

Two months into the investigation, after the transition from the FSA to the PRA and FCA, the FCA stance on insurance add-ons casts light on the difference between the old and new regulators. Commentators believe that the FSA was often backward-looking in its approach to supervision, whereas the FCA, as more forward-looking, tries to think ahead to prevent problems which may occur down the road. The study into add-ons has certainly picked up speed since the FCA took over this line of the investigation. The regulator aims to complete the assessment by the third quarter of 2013 and publish the results shortly thereafter.