In one of its curiously named “Thematic Reviews,” the financial promotions regulator recently discovered alarmingly high levels of non compliant “savings” claims in ads for general insurance. Paul Anning reports the main findings.
Who: Financial Services Authority
Where: London
When: April 2007
What happened:
The FSA carried out a thematic review into press adverts making savings or price claims ('savings claims promotions') made by providers of home, motor and travel insurance, and reported on its review in January 2007. It has since reiterated its findings, including most recently in its April 2007 Financial Promotions Bulletin. The FSA discovered alarmingly high levels of non-compliance adverts, with over 50% of motor insurance advertisements with savings claims either unclear or misleading. The overriding concern is that, as many general insurance products are promoted on the basis of price alone, such price information is "clear, fair and not misleading": the advert must set an accurate expectation.
The FSA gives examples of good and poor practice and in particular highlights:
– the use of statistical sampling to give the impression that most people are eligible for savings, when in fact only a few are – good practice here includes motor insurance adverts which are clear that the savings will apply only to women drivers and drivers over 50's or with no claims history;
– the need to clearly identify the product(s) the claim relates to – eg in travel insurance, European or worldwide cover;
– the need to keep savings claims up to date in a fast changing environment; and
– using imagery which is consistent with the policy – poor practice here includes a picture of a skier in connection with a policy which did not include winter sports cover!
Of particular interest was one comment made in the context of price comparisons as to the need to compare the underlying contracts to ensure that there are no significant discrepancies between them, eg a courtesy car or legal cover. This links with another FSA theme – 'treating customers fairly' – as these discrepancies typically will only come to light when a customer makes a claim against his/her insurance.
Why this matters:
There are three reasons why this matters:
– final warning – the FSA is clearly not happy that two years into its regime and after two specific industry bulletins relaying its concerns in this area, there is still such a high level of non-compliance. So, it has written to the senior management of the largest general insurance firms strongly advocating compliance and will be reviewing the position again in three months time, clearly with disciplinary action in mind.
– ABI and ASA now involved – the FSA has been liaising with both the ABI and the ASA, with financial promotions now a regular item on the ABI's industry steering group agenda. This liaision suggests that both are content with the FSA's approach, from which one might infer that the ASA would apply the same principles to adverts for non-FSA regulated products; and
– focus on outcome – consistent with its 'Treating Customers Fairly' theme, the FSA is clearly focussed on the outcome for consumers: "there should be no mismatch between the general impression created by the promotion and the experience the consumer has when responding to the promotion".
Paul Anning
Partner
Osborne Clarke London
paul.anning@osborneclarke.com
