Review into Sales of General Insurance Add-on Policies by Insurance Brokers

The Commission has published a report on its thematic review of the sale of general insurance add-on policies by insurance brokers in Guernsey. 

The Report can be downloaded here.

General insurance add-on products are insurance policies commonly sold in conjunction with another insurance policy such as a private motor policy, household policy or marine policy. The most frequently sold add-on policies are motor legal expenses and breakdown cover.  In addition, legal expenses cover is often sold with household insurance policies.

In October 2015, the Commission carried out a thematic review into the sale of general insurance add-on products by insurance brokers.  The aim of the review was to assess the manner in which these insurance policies had been sold to customers and whether the sales practices for these add-on policies differed to those for the main policy with which they were sold.  The Commission also considered its requirements in relation to these sales.  

The review found that, while there was no significant detriment to customers, add-ons are being included with the main policy on a compulsory or opt-out basis and may not be appropriate for the broker’s customer.  The Commission has concluded that  all licensed insurance brokers should phase out the compulsory inclusion or opt-out sales of add-on policies.  Instead add-on policies should be sold on an opt-in basis or as separate, standalone policies.

The Commission also concluded that, working with industry, it will review  the requirements on those authorised to sell general insurance policies on behalf of the broker in 2016 to reflect current sales channels and practices.

The Commission will be following up on the steps taken by licensees to address the concerns raised in the report later in 2016.

Dr Jeremy Quick, Director of the Banking and Insurance Supervision and Policy Division said “this proved to be a useful and helpful thematic for all the licensees and the Commission. The immediate conclusion is that the residual sale of add-ons other than on an opt-in basis should stop in Guernsey in line with practice in the UK.”