The Financial Conduct Authority (FCA) published its provisional findings of a market survey on general insurance add-ons today. Although the survey looked at five specific add-on products; home emergency, Guaranteed Asset Protection (GAP); personal accident; travel and gadget, the findings and the FCA’s proposed remedies have implications for the design and distribution of all insurance add-on products.
In their press release issued today, the FCA summarise their key findings:
- a lack of competition and information at point of sale, preventing consumers from making comparisons and informed decisions about products
- 25% of consumers who bought insurance as an “add-on” were not aware that they could buy the product separately elsewhere
- 58% of add-on buyers did not make comparisons with other policies in the market, compared to 22% of buyers of “stand-alone” products
- depending on how information about the “add-on” purchase was presented to consumers, they could be up to four times less likely to shop around than they would for “stand-alone” purchases
- 38% of add-on buyers said they had not planned to buy add-on insurance before the day of purchase
- 69% of add-on purchasers could not accurately remember how much they paid for the product three to four months later, and 19% could not even remember buying it.
The FCA also found that “the proportion of the retail price that is paid out to settle claims, the claims ratio, is lower than average across these markets and very low in some, indicating that many consumers may be paying for products that are poor value.”
Ensuring consumers get good value for money from insurance products is one of the primary drivers behind the FCA’s thematic reviews. However, they also acknowledge that unless a customer makes a claim, they are unable to experience or know the value of their insurance product.
In our whitepaper, Closing the gap: increasing consumer understanding and trust in the insurance sector, we looked at how some Legal Expenses Insurance (LEI) providers (subject of a previous FCA thematic review) are looking to adopt a service-led proposition which gives demonstrable value to LEI customers even if they don’t need to make a claim.
These latest findings from the FCA highlight the need for all providers of insurance to put their customers at the heart of the product design and distribution strategies. In doing so, they will ensure they are both meeting the needs of their customers and the demands of the FCA.
To find our more about our value-add services for insurance providers, don’t hesitate to call us on 020 8731 2424.