The Financial Conduct Authority (FCA) has announced plans to ban the use of 'opt-out' selling.
Opt-out selling is typically used to sell products like insurance. You buy a different product, but then have to explicitly opt out – for example by unticking a box in an online application – of buying add-on insurance policies.
The FCA said its investigation into opt-out selling had found people often bought insurance they didn't need, with many not even aware that they had bought an additional insurance product. As a result a whopping £108 million a year is being wasted across the nation.
The ban will apply to any add-on sales of regulated or unregulated products offered alongside financial products. So this will cover things such as legal expenses sold alongside home insurance, breakdown cover sold alongside car insurance, or protection sold when taking out a mortgage or credit card.
Firms will still be able to sell this add-on insurance, but it will be up to us as customers to actively choose to buy them.
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The FCA wants firms to provide better information around add-on insurance products to help us make a more informed decision as to whether we actually need it, and, if so, what type of product suits our circumstances best.
As a result the regulator is introducing new guidance for firms, which includes introducing the most common add-on products earlier in the sales process, as well as making it easier to compare packages. It also wants firms to give the annual price of add-ons, rather than relying on monthly figures.
The FCA will now hold a consultation period on its plans, which ends on 25th June.
Have you fallen foul of this method of selling insurance? Is the FCA right to ban it? Let us know your thoughts in the Comments box below.
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