U.K. Regulator Reviewing Insurance Add-On Products

July 9, 2013 by Lindsay Fortado

The U.K. markets regulator is reviewing whether there is enough competition in insurance add- on products, which are sold along with purchases such as vacations or a car.

The market study is looking at whether consumers understand what they are getting and how firms respond to expectations, according to Martin Wheatley, chief executive officer of the Financial Conduct Authority.

“We’ve called for evidence and approached a number of firms in the market for information,” Wheatley said in a speech marking the 100th day in operation for the FCA. “We are testing whether poor outcomes in add-on sales could reflect particular consumer behavioral traits and firms’ responses to them.”

FCA said the market study will look at the nature of competition in these markets, in particular whether these products represent good value for money and whether consumers understand what they are getting with their policy.

The study will investigate what impact add-ons have on consumer behaviour and expectations, how firms respond to those, and whether poor market outcomes arise as a result.

“Our new competition duty is the single most significant change in our objectives as a regulator. It means that we don’t just wait for problems before we try to promote competition in the markets we regulate,” Wheatley said.

The FCA is carrying out a number of reviews into everyday insurance, including motor legal expenses insurance, mobile phone insurance, how firms handle claims, and a fine for one mobile phone insurance firm. The FCA said it is also looking at premium finance and private investigators.

–Editors: Anthony Aarons, Peter Chapman