A financial service regulator has announced its plans to ban opt-out selling in insurance products.
The Financial Conduct Authority (FCA) said the ban would apply to any add-on sales of regulated or unregulated products offered alongside financial primary products, such as legal expenses sold with home insurance, breakdown cover sold alongside motor insurance, or protection cover when taking out a mortgage or credit card.
The regulator is seeking views from the insurance industry for a consultation paper. It said the proposal would also include introducing guidance for firms so they could give consumers information about add-ons "at the right time" in the sales process.
Christopher Woolard, director of strategy and competition at the FCA, said the proposal meant consumers would be in a better position to decide what they want and consider the options available to them.
He said: "This is about ensuring consumers can make the right decision on what add-on insurance they do or don't need. Forgetting to un-tick a box at the end of a purchase is not making an informed choice."
According to a study into the general insurance add-ons industry, conducted by the FCA, opt-out selling often resulted in consumers buying an insurance product they did not need and some consumers were not aware of the purchase.
Woolard said: "Our work shows that the opt-out model means too often consumers are buying a product when they have not been able to give any thought to whether or not they need it. We are all familiar with having to double check whether or not we have accidently agreed to buy an add-on insurance product when buying car insurance or tickets online for example."
Woolard believed fewer consumers would end up with products they didn't want or didn't even know they owned.
Alexis Roberts, insurance partner at Pinsent Masons, said: "This change is in line with the FCA's previous approach to add-ons. Many firms have already adopted as best practice the approach of using opt-ins only, anticipating the changes on which the FCA is now consulting. However for those firms that have not already made the change, as well as the changes required to sales processes to remove opt-outs, they may have to look again at their financial models to assess the impact."
Steve Folkard, director at PwC, said: "A logical conclusion of this thematic could be redress for those who have bought add-ons unnecessarily through opt-out processes. Insurers should start looking at whether these have been appropriately targeted and marketed in the past and, if not, decide what action they are willing to take now."
The consultation runs until 25 June 2015.