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.