CP15/13: General Insurance Add-ons Market Study – Proposed Remedies: banning opt-out selling and supporting informed decision-making for add-on buyers

We are consulting on our proposals to improve the add-on sales mechanism to help customers make better decisions when buying add-ons to general insurance products.

Why are we consulting on this?

This consultation paper follows our general insurance market study, which found that competition in add-on markets does not always work in the interests of consumers. The market study was the first under our new competition mandate, and looked at whether competition in markets for add-ons was effective or not, and whether this had an impact on consumer outcomes. We confirmed the findings of our market study in July 2014.

We now propose to ban opt-out selling and are issuing guidance to help firms deliver better and more timely information to add-on buyers, particularly when they are shopping through price comparison websites.  

Who is this Consultation Paper aimed at?

Due to the diversity of the remedies proposed, a broad cross-section of customers and financial services firms could be affected. Specifically, in relation to the individual remedies:

  • opt-out selling: authorised persons, firms and their representatives selling all types of regulated financial products
  • appropriate and timely information on add-on products: insurers, intermediaries, other distributors and their representatives selling general insurance products

Finally, the wider financial services industry may be interested in the proposals as they follow on from our first market study.

Consultation paper CP15/13 [PDF]

What is the background to this? 

We found that competition for add-ons is not effective because:

  • Selling products as an add-on has an adverse impact on consumer behaviours and decision making.
  • The add on channel provides the primary product provider with a clear point of sale advantage that can restrict choice and competition for consumers.
  • Due to these weaknesses in the sale of add-ons, we found that consumers are more likely to buy inappropriate or unsuitable products, or receive poor value for money. This translates into overpayment, which we estimated as at least £108m a year.

We issued our consultation on the GAP insurance remedy 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.

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.

Now we are consulting on the two remedies 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

What are the next steps?

We want to know what you think of our proposals. Please send us your comments by 25 June 2015. You can respond by using the online response form or writing to us at the address on page 2 of the paper.

We will consider all responses and expect to provide feedback in a Policy Statement in the second half of 2015 together with the finalised rules and guidance.

We will publish a discussion paper exploring a range of options for introducing a value measure in GI markets in Q2 of this year.

Want to find out more?

For more information, see: