The Financial Conduct Authority has proposed plans to ban “opt-out” selling where customers are automatically sold an insurance product that they have to opt out of at a later date.
After a market study into the general insurance add-ons industry in 2014, the regulator found that opt-out selling often results in consumers buying a product they do not need.
In some cases, the FCA found that the consumers are not even aware they have bought an add-on in the first place.
The clamp down would relate to any add-on sales of regulated or unregulated products offered alongside financial products.
This includes legal expenses insurance sold with home insurance, breakdown or key cover alongside motor insurance or protection when taking out a mortgage or credit card.
Under the proposals, the FCA will also offer guidance to help companies provide appropriate information to help customers make an informed decision.
Christopher Woolard, FCA director of strategy and competition, said: “This is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need. Forgetting to un-tick a box at the end of a purchase is not making an informed choice.
“Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give any thought to whether or not they need it. We are all familiar with having to double check whether or not we have accidentally agreed to buy an add-on insurance product when buying car insurance or tickets online, for example.
“These proposals will mean that consumers will be in a better position to decide what they want and consider the options available to them. Fewer consumers will end up with products they didn’t want or don’t even know they own.”
The FCA will consult on the ban and the proposed guidance until 25th June.