Industry regulators are beginning to look into an insurance company practice, whereby companies attempt to sign up customers for ‘add-on’ products by placing pre-ticked boxes on forms. However, the industry has responded that this practise has been all but abandoned.
The Financial Conduct Authority (FCA) put forward a series of measures earlier this week in attempt to change how insurers currently force on extra policies, in response to the news that consumers are currently being overcharged as much as £200m a year. The product market, which includes identity theft protection, home emergency and breakdown cover, brings in £1bn a year for the insurance industry. This is typically sold alongside consumer insurance such as car home or travel cover. The FCA presented the results of an eight month long study, taking an approach grounded in behavioural economics – while also warning buyers that they’re receiving poor value from these products.
Within a few months of signing up for their policy, it was found that almost one in five individuals had forgotten that they’d bought the cover. Seven in ten couldn’t recall how much they’d paid. The watchdog has argued that the premiums being charged are often opaque even though the consumer made a low level of claims on the policies. They’re arguing that the business must begin to recognise that consumers are people, individuals who need certain individual needs met, rather than seeing them as pound signs out of which they can make as much money as possible.
Among the package of proposed reforms included the regulator wanting customers to be actively included in exactly what cover they’ll be buying, and calling on companies to publish ‘claims ratios’ to show the proportion of the retail price paid out to settle claims. The FCA are also targeting the ways in which add-ons are offered through price comparison websites. Insurers have responded that they’ve already made changes to how they operate. Some have claimed that this is a ‘non-event’ – that everybody has already shifted to an opt-in form of insurance selling.
The FCA’s study also focused on guaranteed asset protection (GAP). This is used to cover the difference between the price paid for a car and the amount offered by an insurer if that car is stolen or written off. The FCA argues that customer should be required to confirm in writing that they desire Gap in the days after they’ve bought the vehicle.
The Association of British Insurers (ABI) have also weighed in, claiming that the FCA seem to be taking a fairly ‘one size fits all’ approach. They also claim that the proposed requirement for insurers to publish claim ratios is unhelpfu,l as they don’t give an accurate display of customer value. Despite this, the FCA will be seeking comments on the review over the next four weeks before starting on a formal consultation process.
Are you currently looking for affordable insurance? Find yourself confused by certain aspects of the insurance industry and don’t want to get swindled? Get in touch with us on 0161 388 2520 and we’ll help find exactly the policy that meets your individual needs.