Starting April 1, the Financial Conduct Authority (FCA) will implement new rules for selling insurance add-ons that will change the way brokers work. General insurer RSA
advised brokers to brush up on the upcoming rule changes to serve their clients better.
A study by the FCA showed that selling insurance products as add-ons often leads to customers purchasing products that were either of poor value, or not the type the consumer really needed. In response, the FCA proposed the following rules:
- Banning opt-out selling
- Improving product information provision in relation to general insurance add-ons
The FCA defines an add-on as any type of good, service or right purchased or provided with, or alongside a, primary product. Add-ons are different from additional optional extras (AOEs) which are always purchased together with a primary product and are not policies in their own right. While AOEs are not true add-ons, they are also subject to the following FCA rule changes.
Beginning April 1, selling add-ons and AOEs are prohibited to be sold on an opt-out basis. This means customers must actively select the features they want to purchase. The only time an opt-out feature can be included in a policy is if it’s genuinely free both at the start of a policy and at renewal. If the feature will incur a charge upon renewal, consumers must opt-in. Products in ‘unbreakable bundles’, or those which cannot be purchased separately, must also be sold on an opt-in basis.
offered the following advice to brokers as they change their selling methods in compliance with the FCA ruling:
- Add-ons and AOEs should no longer be pre-selected when customers purchase insurance, including all online customer journey screens.
- Provide customers with sufficient information all throughout the sales process to help them make informed decisions.
- If customers have purchased add-ons or AOEs on an opt-out basis, they must be advised upon renewal that these features are optional and these can be removed if they want. This only needs to be done once, unless there have been changes to an add-on’s terms.
- Always gain consent from the customer before accepting payment for any add-ons or AOEs that used to be free, but are no longer.
With regards to RSA
’s own products, its Oak home insurance policy automatically includes home emergency services and legal protection cover. There is no additional premium involved, and customers cannot opt out. The annual travel policy for Oak is an add-on that is subject to the FCA changes mentioned above.