ARAG has welcomed new consumer regulations for add-on sales as a positive step towards ensuring that specialist insurance products are only retailed by experts. The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations that have just come into force provide two specific changes that affect brokers and ensure customers get a fairer deal.
Products that are ancillary to the main purchase, such as travel insurance on package holidays, can no longer be sold on an opt-out basis. Typically this means that a pre-ticked box is not allowed as consumers must take the initiative to opt-in, knowing what they are requesting and what it costs. And if the main contract is cancelled the add-on must automatically be terminated and refunded. A second requirement is that any post-contract helplines should be charged at basic rates and not surcharged in any way.
“Buying the correct insurance should be an informed choice” says ARAG Head of Underwriting & Marketing, David Haynes. “The new regulations provide a great opportunity for intermediaries to create new schemes across a wide range of consumer purchases that might require an insurance add-on such as legal or emergency cover. For too long, add-on purchases have been open to mis-selling whereas the tightly controlled broker market has been retailing appropriate yet sometimes complex products effectively and in large volumes.
“Whilst welcoming these new regulations – which mirror conclusions in the FCA review of add-ons that preceded them – we do hold reservations over the ‘sunlight remedy’ on claims ratios proposed in the review and will continue to explain our rationale at every opportunity”.
To see ARAG opinion on the FCA final report into add-on insurance products please see the link below.