global insurance management

Optional Extras


Oct 05 2011

Optional Extras

Relevance:             All firms.

Action required:     Check documentation issued to customers where sale is made of Optional Extra cover.

Although a minor rehash of guidance issued in 2006, we thought this issue should be brought to your attention as the FSA has published an Optional Extras factsheet.

It looks like guidance has been revisited as the FSA are concerned that firms are still failing to handle ‘add-ons’ properly. We hope you already know:

  • Where you offer insurance cover that is additional to the main policy you need to make sure that your customer/client is fully aware that the cover is optional and whether it will attract any additional premium.
  • That the Demands and Needs Statement should reflect how the sale has been arranged; if advised or non-advised and, if advised, how the cover meets the individual’s personal requirements.
  • The Statement of Price document should make it perfectly clear what the individual items cost and not have them rolled up into one total figure.

It is worth reminding firms of the FSA’s helpful guidance regarding Optional Extras:

If you sell these to your customers you need to ensure you:

  • give them clear and not misleading information about the optional extra so they can make an informed decision without overloading them with extra documentation;
  • make clear that the optional extra is optional;
  • make clear the price/premium of the optional extra, separating it from the price of the main insurance policy; and
  • if you are giving advice explain you will need to assess the customer's suitability for the optional extra and explain how it will meet the customer's demands and needs.

It may be a timely opportunity to review the documentation sent out where the sale of an optional extra has been made to ensure it is in keeping with what the FSA expect, in accordance with TCF principles.

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