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The FCA is concerned that the practice of defaulting consumers into buying a product which they then have to opt out of, for example by using pre-ticked boxes to sell the consumer add-on insurance, often results in consumers purchasing an insurance product they don’t need.
Its market study of insurance add-ons found some consumers are not even aware they have bought an add-on.
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, FCA 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.
“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 ban would apply to any add-on sales of regulated or unregulated products offered alongside financial primary products, this includes 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 also wants firms to provide consumers with more appropriate and timely information that will allow them to make an informed choice on what, if any add-on products they need, and to identify the best package.
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.