General insurance add-ons market study

Published: 24/07/2014     Last Modified: 25/03/2015

This report sets out our final findings from our market study on the sale of general insurance add-ons. This follows on from our provisional findings report in March 2014, and takes account of the consultation responses we received. The study was launched by the FSA in December 2012 and was confirmed as the FCA’s first market study in July 2013.

What are GI add-on products?

A wide range of general insurance products are sold alongside or on the back of ‘primary products’.  

These primary products may be financial services – e.g. home insurance – or they may be non-financial products – e.g. motor vehicles, mobile phones or services such as passenger flights.

The insurance products sold alongside primary products are known as ‘add-ons’.

What did we do?

This was the FCA’s first market study. Our objective was to test whether competition in the markets for add-ons is effective or not, and if not, to understand why this might be so.

We analysed a range of information from insurers and intermediaries, including product literature and data relating to sales, pricing, profitability and claims.

We used behavioural economics as a key tool during the study. We carried out both quantitative and qualitative consumer research, and undertook an innovative behavioural experiment in which we tested consumers’ reactions to the add-on mechanism in a simulated environment.

The final report can be accessed from the link below. Links to more detail on individual pieces of analysis and research carried out earlier in our study can be found at the end of this page.

MS14/1: General Insurance Add-Ons: Final Report – Confirmed Findings of the Market Study

Who should read this paper?

This will interest:

  • firms that sell general insurance add-on products or are considering selling these products
  • consumer organisations
  • any consumers who have bought or are thinking of buying these products
  • anyone interested in the FCA’s approach to advancing its new competition objective and what market studies look like

What were our findings?

Our study confirmed that selling a product as an add-on often lead to consumers purchasing products that were of poor value and not what they needed. We also found that the value of general insurance products is not always clear.

We remain committed to strengthening the transparency and comparability of the value of general insurance products and have proposed to impose a requirement on firms to publish claims ratios as a measure of the value of a product.

What are the next steps?

We consulted on the GAP insurance market remedy (CP14/29) in December 2014, proposing a deferred opt‑in period for customers when add‑on GAP insurance is sold as part of buying a vehicle and improved information about shopping around.

Now we are consulting on the two remedies (CP15/13) designed to address some of the issues we found with the add-on mechanism, by proposing rules and guidance on:

  • banning opt-out selling, and
  • improving product information provision in relation to general insurance add-ons

We remain committed to introducing a measure of value to encourage competition between firms and help consumers make informed decisions. We plan to publish a discussion paper in Q2 of this year considering a range of options, including the claims ratio.

How can I find out more?


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