25 March 2015
Travel insurers have furthest to come to meet new FCA rules
Pre-ticked boxes are an unhelpful evil of the internet age. It's easier than ever to purchase just about anything online these days. But it's also easier than ever for companies to inadvertently upsell you to an additional product you didn't really want or need.
If you're buying in a hurry, there's every chance you've over looked some additional feature that you've been opted into buy. And it's only by unticking the pre-ticked box that you can wriggle out of it. It's a bit like someone at Sainsbury's dropping additional products into your trolley in the supermarket, in the hope you won't notice. At worst, you're left buying something you didn't need, or at best you may have ended up paying more for the package than you should have done.
Improvements already visible
Thankfully, insurers have been cleaning up their act on this front over the last couple of years - ever since the regulator let it be known that this was an issue on its radar. But there are still pockets of the industry that will have work to do to get in line with the new rules.
One of the worst offenders in the mainstream - until very recently - was the AA, which opted customers into home emergency cover when they bought insurance from them. Thankfully, since a shake up in the management of the financial services division, the AA appears to have stopped this.
Another common practice in the world of motor insurance, which many big brands still engage in, is automatically opting customers into paying monthly when they've told the comparison site that they want to pay annually. This can end up costing the unscupulous customer a few extra pounds in interest and fees that they needn't have paid. And in the worst cases, it can add hundreds of pounds extra to the total cost.
Tricks of the travel insurance trade
But the sector with the furthest to come is travel insurance. Some 13 of the 35 travel insurers rated by Fairer Finance automatically opt customers into additional features, or additional elements of cover - rather than giving the customer the choice to opt in. Having been quoted a price, these insurers often give customers the chance to remove elements of cover - such as protection against losing your cash on holiday, or protection for your baggage going missing - rather than giving the chance to proactively add these elements of cover.
The offenders include brands such as M&S Bank, Lloyds, Halifax and Virgin Money - well known high street names. Don't get me wrong, these are not heinous crimes, but they're very clearly decisions taken to benefit the company, and to disengage the customers.
In the case of M&S, for example, you're opted into £4,000 of Cancelation cover - which you can cut to £2,000 and shave a few pounds off your premium if you click on a drop down menu. You're also opted into £1,000 of personal possessions and baggage cover. But you can reduce this cover to 0 and shave even more off your policy if you choose. But once again, it's left up to the customer to take things off, rather than add them on.
The worst area for pre-ticked boxes, of course, is data protection - where the vast majority of companies still opt you into consenting to them spamming you with additional marketing material. It's rarely too difficult to opt out - but inevitably, people in a hurry get caught out.
Time to take the long-term view
There are plenty in the industry who will take the "buyer beware" defense. It's not our fault if a customer buys their cover in a hurry. And of course, they're right.
But it's an incredibly short-termist view. If we want to create empowered, more engaged and more knowledgeable consumers of financial products, companies need to be responsible and help customers make the best decision for their circumstances - not just flog them whatever they can get away with.
The FCA has today published its final consultation paper into the add-ons market, and is proposing a full ban on opt-ins, which I wholeheartedly support. In this regard, it's a useful and decisive piece of policymaking by the regulator. However, it has still left some of the issues in the market unaddressed.
One of the main problems with add-ons - even when you're not opted in - is that once you're in the insurer's site (as opposed to on a comparison site), you've lost the ability to compare the total cost with other insurers. The FCA says it is putting together guidance to encourage insurers to do more to help customers get a total price upfront. But to my mind, comparison sites also need to be forced to ask more questions about add-ons upfront - so that customers can compare like for like prices for the total package they're after.
The regulator seems satisfied to simply issue guidance on this, rather than mandate some change. Until that is changed, many customers will continue to overpay for the add-ons they buy, even if they are conscisouly making a decision to buy them.