The FSA is set to crack down on the sale of optional covers such as motor legal expenses after its research found brokers were failing to properly advise customers.
The FSA, which reviewed 201 insurance transactions from 47 firms in which optional extras were added to motor and household policies, found 70% of the information presented to customers was "unclear" and "potentially misleading".
The research also highlighted that in over half of the transactions documentation indicated an "advised sale" when no advice or a recommendation from the company was given for additional extras.
Brokers warned that the findings indicated a worrying and "cavalier" attitude to compliance among some sections of the broking fraternity.
The regulator said: "In cases reviewed firms had not explained what the additional extra would do (or that it was optional), how it matched their customers' demands and needs, and had not properly disclosed the price to the customer."
It warned that it would conduct further reviews of disclosure in 2006 and would take action against any firm that "deliberately" sought to mislead customers.
Chief executive of Broker Network, Grant Ellis, expressed concern that the findings were indicative of a general lack of compliance among some personal lines brokers.
He said: "If brokers are making such basic mistakes in breaking down premiums that are being
70% of sales contained "unclear and potentially misleading" information
56% indicated "advised sales" where there was no advice or recommendation for additional extras
81% did not detail adequately optional extras within customers' demands and needs statement.