More and more consumers will have noticed pre-ticked boxes which sell insurance alongside the product they are buying. Many consumers have found themselves purchasing insurance that they may not need. Now, the UKs financial watchdog has moved to change the way add-on insurance is sold.
Regulators are now concerned that consumers are being pushed into buying insurance which is overpriced or that is not required. There are also questions about whether a pre-ticked box could result in consumers being unaware of what they are purchasing.
The general insurance add-on market, where insurance is sold alongside goods such as holidays, is thought to be worth around £1bn. The Financial Conduct Authority (FCA) has found that consumers are being overcharged by up to £200m for insurance sold alongside products.
Christopher Woolard, director of policy, risk, and research at the FCA said: âTheres a clear case for us to intervene.
âCompetition 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.â
A lack of competition is one of the major problems that has been discovered by the FCA. More than half of consumers have reported that they do not shop around when insurance policies are bundled with other products.
Figures show that 25% of consumers buying add-on insurance were unaware that they could purchase cover separately elsewhere. 38% of those surveyed had not planned to buy add-on insurance before the day of purchase. 69% could not accurately remember how much they had paid for the insurance and 19% could not remember purchasing the insurance at all.
The FCA has now proposed banning the pre-ticked boxes to ensure that customers are always aware of what they are purchasing. The move would ensure that consumers are given greater choice over how they purchase insurance for products such as holidays.
There is currently no date set for when automatic pre-checked add-ons could be banned. A formal consultation process on the issue is set to run until 8 April, after which any further action will be announced.
Richard Lloyd, executive director of Which? said: âIts good to see the Financial Conduct Authority cracking down on poor-value insurance add-ons, and helping to prevent consumers being misled or caught out by signing up for products they dont need.
âWe want greater transparency across the insurance market, including a requirement on providers to put last years premium on renewal notices, so that consumers can find the best deal for them.â
Anne Thomson, Head of Travel Law at Your Holiday Claims, commented: âWe are pleased to see that steps are being taken to offer holidaymakers greater control over how they choose their holiday insurance.
âIt is always important that holidaymakers understand what they will be covered for under their travel insurance. As the research suggests, this may not always be the case when insurance is bought as an automatic add-on.â
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