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The opt out add-on ban and how it affects brokers and customers
In the first of this four part series, Berkeley Alexander examines the FCA’s opt out ban on add-on insurance sales and how this affects brokers and their customers. See below for the competition question this month and good luck!
Opt-outs now banned – are you compliant?
The FCA’s review of sales of add-on insurance products confirmed that ‘opt-out’ selling of add-ons often results in consumers purchasing insurance products that they don’t need, and in some cases, aren’t even aware of. As a result the FCA has now made its decision to ban opt-out sales.
There are two main areas this impacts:
1) Extensions to the ‘main’ policy – for instance, home insurance that allows additional aspects of cover to be selected at extra cost. Most often this will be things like legal expenses, but it can also include policy ‘options’, for instance, accidental damage cover (because it’s optional).
2) Separate policies sold alongside the ‘main’ policy – these could include things like legal expenses, home emergency or key cover. FCA principles already require a separate quote process for each policy, so if an adviser is bundling various policies, this should be made clear and information must be provided on each product. Most importantly, this must include premium costs, the fact that they are in no way linked, and that none of them is compulsory.
What the proposed ban on ‘opt-out’ sales will NOT affect is where the main policy automatically includes cover that some other insurers offer as an optional extension. Some home insurance policies include legal expenses, keys and/or home emergency for example. All clients with that insurer will have this extra cover, and it’ll be provided within the standard price.
Berkeley Alexander supports the move, but it is simply re-stating what every good adviser should be doing already – making no assumptions on the client’s behalf, making the client aware of what cover is included as standard, fully explaining the optional cover available, and at what cost.
The FCA’s decision will certainly put the brokers’ role in the spotlight; customers will rely on professional brokers to advise them of the risks and the value of the different cover options available to them. Quality products, sold through professional, knowledgeable brokers, is simply treating customers fairly.
Competition question: What type of add-on GI sales will NOT be affected by the FCA’s opt-out ban?
A. additional cover included as standard on the main policy
B. legal expenses cover sold alongside the main policy
C. optional extensions to the main policy that incur extra cost
Email A, B or C to editors@ae3media.co.uk
See the competition terms and conditions.
