Member Article

FCA Regulation Changes 2016 – Are You Prepared?

The sale of add-ons

The ban on the sale of add-ons on an opt-out basis will commence on 1st April. There is no doubt that add-on policies provide valuable and convenient benefits to customers, however, the FCA have ruled that the customer must positively elect to buy an add-on.

If you are currently offering products to consumers on an opt-out basis, this is something that must change by April. If customers previously bought opt-out products, regulations now mean that at renewal, the products must be offered on an opt-in basis instead.

This is not likely to be the last change made by the FCA – they are currently consulting on increasing value for money for add-ons and insurance policies in general.

More information about add-on products must be made available, and the annual cost of add-ons must be given separately from the cost of the main product, and common add-ons must be introduced earlier in the sale.

Mike Brown, national insurance sales manager for On Insurance commented: “The FCA have rightly concentrated on the sale of add ons as there is little doubt that previously, clients were being ‘sold’ products that they had little need for and knew little about. You would have to question what value for money some of these products represented.

“The sale of add on products, per se, is not necessarily a bad thing as long as the client knows what they are buying and they have a real need for it. A lot of add on products have been sold on an opt out basis and the client has little knowledge of what they are buying, and, indeed, that they have actually purchased an extra product. The consumer has enough to suffer with general insurance premium increases without purchasing products they do not want or even need.

The seller will now have to explain the add on cover in more detail and identify a need for it, which can only be good for the industry as it needs to develop trust with consumers. Customers’ perceptions of the insurance industry are not particularly good and we need to promote and develop this trust.“

Implementing the changes

Ensure that there are no ‘pre-ticked’ boxes on your website for add-ons. If there are, remove, or replace with boxes for customers to actively tick. Check that at the time of renewal, any previously pre-ticked boxes are now unchecked. The definition of an add-on in relation to the sale of add-ons is very broad, and includes: commercial customers, unregulated services, regulated services, insurance policies and packages. Ensure that you have implemented the changes across all of these areas.

Complaints handling rule changes

On 30th June 2016, the FCA changes to complaints handling rules will come into place. The main change appears to be the change to the handling of informal complaints.

The FCA have said that these changes are to make it easier to deal with simpler issues without escalation, and to ensure that customers are aware of the Financial Ombudsman Service.

The changes mean that firms will now have more time to resolve a complaint, which is beneficial to firms; however, all complaints must now be reported to the FCA.

The rule changes also incorporate the introduction of a written summary resolution communication, which can confirm that a complaint was made and that the firm consider it to be resolved, and inform the complainant that they can contact the Financial Ombudsman Service if they are unsatisfied with the resolution.

Mike concluded: “The client needs transparency in dealing with insurers and intermediaries and some of the new measures that have been introduced can only be good for the industry.

“At On Insurance we constantly review our products to ensure they are fully compliant and fit for purpose and will be supplying guides to our brokers to ensure they can sell products that are beneficial to the client in a fit and proper manner.”

This was posted in Bdaily's Members' News section by On Insurance .