The selling of pre-ticked insurance ‘add-ons’ such as breakdown cover as part of a car insurance deal is set to be outlawed by the Financial Conduct Authority.

Research from the industry regulator has found that around one in five people don’t realise they are purchasing an additional add-on product and that the practice is costing consumers over £100 million a year.

Some insurance add-ons have already been banned but the new proposals are set to make the practice illegal. Keep reading to find out more.

One in five people buy insurance add-ons without realising

The Financial Conduct Authority has found that around 20 per cent of people are so concerned with finding the right car or home insurance that buy add-on cover without even realising it. The regular has estimated that opt-out selling – where a box is already ticked on a website when the consumer is purchasing something else – wastes consumers more than £100 million a year.

Following this research the FCA is set to ban the automatic selling of add-ons. This follows similar bans on products such as default insurance sales by budget airlines and concert promoters under the 2013 Consumer Contracts Regulations.

Christopher Woolard, director of strategy and competition at the FCA, said: “This is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need. Forgetting to un-tick a box at the end of a purchase is not making an informed choice.

“Our work shows that the opt-out model means that too often, consumers are buying a product when they have not been able to give any thought to whether or not they need it. We are all familiar with having to double check whether or not we have accidentally agreed to buy an add-on insurance product when buying car insurance or tickets online, for example.”
The ban will apply to add-on sales including:

  • Legal expenses cover sold with home insurance
  • Breakdown or key cover sold alongside car insurance
  • Protection cover when taking out a mortgage or credit card

Insurers required to show annual cost of insurance

The regulations will also require insurers to show the annual price of insurance, which The Guardian reports is most likely to affect mobile phone insurance, typically sold on a monthly price basis.

The Financial Ombudsman Service has reported numerous cases where buyers of mobile phones have only discovered much later on that insurance has been added automatically without their knowledge.

Confusion as to whether new rules will tackle travel insurance

One of the uncertain outcomes of the new proposals is whether they will force airlines to change the way they sell travel insurance alongside plane tickets. For example, Ryanair’s current practice requires travellers to select ‘don’t insure me’ from a drop-down menu of destinations to avoid automatically buying their travel cover.

Last year the airline was fined €850,000 by Italian authorities for ‘unfair commercial practices’ relating to the sale of travel insurance where customers were assumed to have opted-in to cover unless they specifically chose otherwise.

A spokeswoman for the airline said: “Ryanair’s travel insurance product meets all regulatory requirements and offers customers the choice of two options, neither of which is pre-selected.”