Regulator to quiz firms about profits and fairness
The FSA will launch a probe into general insurance add-ons in the new year, Insurance Times can reveal.
Insurance Times understands that the FSA will investigate:
- The level of profit firms get from add-ons
- How add-ons might harm customers
- The state of competition in the market
- How customers buying add-ons behave, and will also scrutinise firms selling add-ons
The FSA has not yet revealed exactly what it means by add-ons, but it is likely to include high-margin, low-cost products such as legal expenses, breakdown insurance and key insurance.
The regulator will hand the study over to the FCA next year, and the exercise will be finished by Q3 2013, Insurance Times understands.
The move will be a fresh regulatory probe, on top of the Competition Commission’s probe into the UK motor trade, which is focused on credit hire costs and the cost of repairing vehicles, and the FSA’s thematic review of brokers’ premium finance deals.
The regulator decided to act because it believes it has found constant consumer detriment in the general insurance add-on market.
The FSA is worried that customers may not understand add-ons, and that some of these products might be of little use.
Insurance Times understands that the FSA will take action if it finds any factors that it thinks affect fairness and competition around add-ons.
The regulator has already started interviewing some firms about add-ons ahead of the full investigation.
This is the first example of the regulator acting on its previous warnings about add-on insurance.
In March the FSA said add-ons products were an emerging risk, and in September incoming Financial Conduct Authority (FCA) boss Martin Wheatley announced a focus on low-value general insurance products.
The FSA declined to comment.
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