Personal Lines, selling add-ons and the FCA
The FCA has recently introduced new rules and guidance for selling add-ons. So, what do we all need to be doing?
What’s the definition of add-on?
The FCA has defined an add-on as any type of good, service or right purchased or provided with, or alongside a, primary product. For example, accidental damage and protected no claim discount are both defined as add-ons.
What are the changes to add-on selling?
From 1 April 2016, add-ons and product extensions cannot be sold on an opt-out basis; the customer must actively choose what they want.
If an add-on is truly free, opt-out can be used.
Any ‘unbreakable bundles’ which cannot be sold separately can still be sold as a package but it must be sold on an opt-in basis.
You need to make sure that:
Your customers know that add-ons are optional and can be removed if they don’t want them, including customers who were sold an add-on before April 2016.
Any customer journeys or screens can’t show add-ons pre-selected.
Customers who have been sold add-ons automatically need to be contacted to let them know they are optional and can be removed.
If you offer free add-ons, and in the future you start charging for it, you’ll need to get explicit consent from the customer to start collecting these payments.
Our renewal invitation letters
Each renewal invitation letter will point customers to the Important Changes leaflet where we’ll list the add-ons available and let them know they can be removed if the customer has them but no longer wants them.
What if I don’t use Aviva’s renewal invitation letter?
If you use your own renewal invitation letter, please add the following wording from 1 April 2016:
“Please read the ‘Important changes’ / ‘Changes’ document before you renew. This provides details of optional additional covers associated with this product. Check your policy schedule to see the ones you have selected. These can be removed on your request if they no longer meet your needs.”
Coming up in September 2016
The FCA has issued guidance to ensure customers can make an informed decision and has clarified its existing rule for standalone products or add-ons:
“A firm must take reasonable steps to ensure a customer is given appropriate information about a policy in good time and in a comprehensible form so that the customer can make an informed decision about the arrangements proposed.”
By the end of September 2016, we all need to comply with the FCA for all products including add-ons and extensions. Look out for further articles in The Loop and in the mean time you can find out more about the changes on the FCA website.
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