Demands not optional
Q. The FSA's factsheet regarding Optional Extras implies we will have to issue a seperate demands and needs statement for uninsured loss recovery, as well as the motor policy connected with it. Is this right?
The Financial Services Authority reviewed the approach of a number of firms to the handling of add-ons, such as motor legal expenses. They found these were not being offered in a high proportion of cases.
I would urge readers to check within their own organisations, that the person responsible for compliance has reviewed your approach against the backdrop of the findings in this document. The FSA will review the matter again during 2006 and 'will take action against firms that deliberately mislead customers'.
If a firm is offering motor uninsured loss recovery as a separate product alongside a motor insurance, it has to comply with the rules.
That means either following the full demands and needs procedure in respect of that policy, or changing procedure, so that such policies are offered on a non-advised basis. You will still need to ensure that you provide a policy Keyfacts for the add-on policy.
You must also ensure that your new business and renewal documentation makes it clear that the add-on policy is an option, and the pricing is clearly shown un-bundled and separately within your invoice or renewal notice.
Your question referred to motor insurance, but the situation applies equally to other add-ons, such as to household policies.
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