global insurance management

Policy Add-ons and Extras (2)

Feb 18 2013

Policy Add-ons and Extras (2)

Relevance:                   All firms.

Action required:           Check that you cannot be caught out by the FSA spotlight on insurance risks (Add on products).

In October last year we referred to the inclusion of “Policy Add-ons” as one of the “emerging risks” that the FSA had identified and included in its Retail Conduct Risk Outlook (RCRO) document. 

In an announcement made in the week before the Christmas break, the FSA is undertaking “a study into general insurance products sold as add-ons”.  As a result, the action suggested last time remains the same and is repeated above.

The following is an extract from the announcement:

“The study will look at whether there are common features of the add-on markets that weaken competition and drive poor consumer outcomes.  It will cover the whole of the relevant markets, taking full account of firms’ and consumers’ behaviour, and how they interact to shape prices and the quality and consumption of the product.”

The research will take place between now and the end of September 2013, with a report issued soon afterwards.

As we know, the FCA takes over from April 2013 and if it finds any reason to do so, it will be able to use its newly acquired intervention powers to protect consumer interest.  This particular area is one that has received ongoing scrutiny over the last few years, so there should be no surprise at this latest development.

We have said before and say again - take the opportunity to review if and how you utilise add-ons and ensure that you have appropriate sales processes and safeguards in place.

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