ABI tells Competition Commission that point-of-sale regulation needed

All extended warranties should be regulated by the FSA, said the ABI head of general insurance John Parker.

Speaking at the Competition Commission (CC) public hearing last week, Parker said competition existed between insurers selling extended warranties in high street stores, but there was a need for point-of-sale regulation.

He was speaking on behalf of Allianz Cornhill, Landmark, Pinnacle and London General who underwrite the majority of extended warranties for electrical goods.

"Insurers face a lot of competition in the extended warranties market. Consumers have the choice between uninsured warranties 'ring-fenced' by the retailer, or those that can buy at the point of sale, by contacting the insurer after the point of sale or from direct mail programmes sent by the insurer.

"But the point of sale in high street stores should be regulated."

He said that in 1997 the approximate split between insured and retailer underwritten products was 55% to 45%.

"But in 2002, it was estimated that the split had moved to 34% insured extended warranties and 66% retailer service contracts."

Parker strongly disagreed with the Consumer Association which said that extended warranties were "another great British rip off".

Parker said: "There is substantial evidence of repeat purchase, which is indicative of customer satisfaction"

The public consultation follows a report last July by the Office of Fair Trading, which concluded that self-regulation of the £828m market introduced under the British Retail Consortium Code of Practice in 1995 had failed.

The CC will report its findings to Patricia Hewitt, the Department of Trade and Industry Secretary, by 1 July.