FCA shines light on murky world of general insurance sales

Providers and brokers of general insurance must be clearer when it comes to selling home and car insurance to consumers and the payment options available, said the Financial Conduct Authority (FCA), the city regulator.

The FCA, which reviewed the online sales activities of 13 insurers and 30 brokers, found consumers would struggle to compare the difference between paying upfront or in instalments.

Linda Woodall, acting director of supervision at the FCA said: "Consumers should expect clear information about the payment options available to them. Regardless of whether people choose to pay upfront or in instalments, it's important that they can see exactly what they are signing up for and how much it costs so they can decide whether they are getting a fair deal."

The investigation also revealed that a sufficient explanation of a proposed credit agreement was not always supplied and that companies acting as a credit broker were not always revealing their credit provider.

If a firm is providing regulated credit or is acting as a credit broker, they are required to provide a representative example setting out the interest rate, any fees or charges, a representative annual percentage rate (APR) and the total amount payable, noted the FCA.

However, FCA researchers found a number of cases where this was either not provided or the example did not include all of the required information, potentially limiting a customer's ability to make an informed choice about how to pay.

The FCA review also identified a wide range of APRs, highlighting the importance to customers of having appropriate information to be able to compare pricing and understand the impact that the cost of finance has on the overall cost of an insurance product.

The FCA also found:

• An adequate explanation of a proposed credit agreement was not always provided sufficiently early in the customer journey to enable customers to make informed decisions
• Firms acting as a credit broker did not always disclose the name of the credit provider or details of their relationship with the firm
• In some cases it was not made clear that a fee would be charged.

The FCA said it expects all firms to consider the findings of the review and take action where necessary. It is also following up with individual firms where it found specific examples of failings and poor practice.