FCA bans Add-On Product Opt-Out selling

Following feedback from the Consultation Paper (CP15/13) released in March this year the FCA has issued a Policy Statement PS15/22 ‘General Insurance Add-Ons Market Study – Remedies: banning opt-out selling across financial services and supporting informed decision-making for add-on buyers’.

While this follows feedback to a general insurance consultation paper the banning of opt-out selling affects all financial services sectors. The statement not only includes changes to the rules which come into force on 01 April 2016 but also a finalised guidance, appendix 2, which has immediate effect. The FCA expects firms to have made the necessary changes highlighted in appendix 2 by 30 September 2016.

The paper clarifies the definition of an add-on product as well as how renewals of add-on products should be treated.

There are some exclusions, such as free products, ‘unbreakable bundles’ and options selected on price comparison websites. However, if free products become chargeable then they fall under the ban.

An unbreakable bundle could be a packaged bank account, whereas a breakable bundle could be a motor policy sold with optional legal expenses cover and breakdown cover.   

The proposed guidance in appendix 2 deals with appropriate and timely information supplied to customers and requires that, for both stand alone and add-ons:

‘A firm must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed.’

The Policy Statement can be accessed here.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

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Our View

This Policy Statement is mostly the application of good business practices and firms that are being fair to customers should not see any changes.

Action Required By You

  • If you operate in this sector, particularly if your sales processes include the potential to sell add-on products, you should read and understand the consultation paper and policy statement;
  • If your firm is affected by any of the issues then review your policies, processes and procedures and decide how you need to update them;
  • ATEB clients should discuss any issues directly with their nominated consultant;
  • Alternatively contact us here.
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About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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