Consumer finance watchdog moves to end ‘opt out’ selling
The FCA has announced plans to ban opt-out selling in financial services markets.
Opt-out selling is the practice whereby the customer has to specify that they have not chosen a product, rather than choosing what they want.
Pre-ticked boxes are often used to default consumers into buying the add-on.
After a market study into the general insurance add-ons industry last year, the FCA found that opt-out selling often results in consumers purchasing an insurance product they don’t need and they are not even aware they have bought.
The FCA says too often consumers are unable to make an informed decision on whether they need or want the insurance that is part of the opt-out package.
The regulator will consult with the industry on the proposals, which include guidance to ensure firms give consumers information about add-ons at the right time in the sales process.
The ban would apply to any add-on sales of regulated or unregulated products offered alongside primary financial products, including legal expenses sold with home insurance, breakdown or key cover sold alongside motor insurance, or protection cover when taking out a mortgage or credit card.
The guidance encourages firms to introduce the most common add-ons to consumers earlier in the sales process and make it easier to compare packages of the primary product and add-ons.
The FCA also wants firms to provide consumers with more appropriate and timely information to allow them to make an informed choice on what, if any, add-on products they need and to identify the best package.
In addition, the FCA has recommended that firms give the annual price of add-ons rather than monthly figures so that overall price is easily understood.
Christopher Woolard, director of strategy and competition at the FCA 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.
“Too often consumers are buying a product when they have not been able to give any thought to whether or not they need it.
“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 consultation period ends on 25June this year.