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FCA to ban pre-ticked 'add-on' insurance sales

Pre-ticked boxes selling insurance add-ons will be banned by the FCA. Photograph: Yuliyan Velchev/Alamy

The pre-ticked selling of insurance "add-ons" - such as legal expenses cover added to home insurance and breakdown cover as part of a car insurance deal - is to be banned by the Financial Conduct Authority.

The FCA found that about one in five people don't even realise they are purchasing the insurance or the add-on cover because they are focused on buying the main product. It estimated that opt-out selling - where a box is already ticked on a website when the consumer is purchasing something else - wastes consumers more than £100m a year.

While the FCA research covered all types of add-on insurance, some practices - such as default insurance sales by budget airlines and concert promoters - have already been banned under the 2013 Consumer Contracts Regulations.

Forgetting to un-tick a box at the end of a purchase is not making an informed choice.

Christopher Woolard, FCA

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.

"Our work shows that the opt-out model means that 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 accidentally agreed to buy an add-on insurance product when buying car insurance or tickets online, for example."

The ban will apply to any add-on sales such as legal expenses sold with home insurance, breakdown or key cover sold alongside motor insurance, and protection cover when taking out a mortgage or credit card. Companies will also be required to show the annual price of insurance, which is most likely to affect mobile phone insurance,typically sold on a monthly price basis.

The Financial Ombudsman Service has reported numerous cases where buyers of mobile phone packages only discover much later on that insurance, often costing £70 a year or more, has been added automatically without the buyer's knowledge.

But whether the new rules will force airlines to change the way they sell travel insurance is unclear.

Currently on the Ryanair website, for example, holidaymakers are taken to a box saying "Insurance - country of residence" when booking a flight. Only if they locate the "Don't Insure Me" button - displayed between Denmark and Finland on Ryanair's pull down menu - can they proceed with the purchase without insurance.

Last year Italian authorities fined Ryanair EUR850,000 for "unfair commercial practices", citing the airline's "unfair, cumbersome and misleading" practice of opting in customers to buying its travel insurance. Our TV screens seem to be full of adverts from lawyers pleading with us to claim for each and every mishap, there is obviously no such thing as an accident in this day and age. Somebody can be blamed and they need to pay!. With this in mind, it would surely be an extremely brave (or perhaps foolish) owner of any business, be it big or small who decided that public liability insurance wasn't necessary. Clicking on the following link will answer your questions that you might have on Is Direct Line Tradesman Insurance A Good Product?.In Italy, those wishing not to buy insurance from the Irish airline have to select a "No Grazie" option nestling between Malta and Norway in a drop-down list of countries of residence.

A spokeswoman for the airline said: "Ryanair's travel insurance product meets all regulatory requirements and offers customers the choice of two options, neither of which is pre-selected."

Brokers Shore Capital reiterated its "sell" recommendation against a number of insurers following the FCA action. "These changes are likely to reduce the penetration rates and conversion rates of such products, which are a significant element of the total profitability of the personal lines insurers. The focus on the poor value offered by such products is likely to negatively impact margins which were over 75% for each of the major personal lines insurers."


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