General insurance add-ons market study

Published: 11/03/2014   Last Modified : 16/04/2014

This report sets out the provisional findings of our market study into general insurance add-on products. 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 is 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 findings are set out in our overall work. More detail on individual pieces of analysis and research is provided in the research reports.

MS14/1: General insurance add-on products

Annex B: Methodology and analysis of firm data

Consumer research reports:

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?

We found that competition in the markets for general insurance add-ons is not effective and that this can lead to poor consumer outcomes. Consumers can be significantly overpaying when they buy products as add-ons.

We believe that there is a clear case for us to intervene in respect of the supply of general insurance add-ons, and this report also outlines a number of proposed remedies.  

What are the next steps?

Our remedies will be subject to cost-benefit analysis and formal consultation.  We aim to publish our consultation on remedies before the end of 2014.    

How can I find out more?

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