Opt-out selling is the practice of defaulting consumers into buying a product like add-on insurance, for example.
An FCA market study last year confirmed many consumers opt-out selling often results in consumers purchasing an insurance product they don’t need and some are unaware they bought one at all, said the FCA.
The FCA said: “Too often consumers are not able to make an informed decision on whether they need or want the insurance that is part of the opt-out package. The FCA will consult with the industry on the proposals which also include introducing guidance for firms so they can give consumers information about add-ons at the right time in the sales process.
Christopher Woolard, director of strategy and competition 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.”
“Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give any thought to whether or not they need it. We are all familiar with having to double check whether or not we have accidently agreed to buy an add-on insurance product when buying car insurance or tickets online for example.”
The ban would cover all add-on sales of regulated or unregulated products alongside financial primary 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 FCA wants firms to offer customers better and more-timely information to give customers a better chance of establishing their own needs.
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 recommends that firms give the annual price of add-ons rather than relying on monthly figures so that overall price to be paid is easily understood.
The consultation period ends on 25th June 2015.
Click HERE for the consultation document.