FINANCIAL PROMOTIONS MORTGAGE
& GENERAL INSURANCE BULLETIN
Welcome to the fifth of our industry bulletins aimed at mortgage and general insurance firms; we hope
you are finding them useful. This bulletin looks, in particular, at general insurance promotions. You will
find more on these and other subjects by looking at our website: www.fsa.gov.uk/financialpromotions.
Please let us know what you think about these bulletins and our website by emailing us at
General insurance regulation – one year on
In this bulletin, we take stock of some of the key issues which have
arisen since January 2005, when new rules on general insurance and
pure protection insurance financial promotions came into effect.
Much advertising is focused on price-matching and savings claims.
As many general insurance products are being promoted on the basis
of price alone, it is important that such price information is clear,
fair and not misleading. We cover these issues below.
We also cover ‘white labelling’, and report on the findings from our
recent work on protection products such as term assurance, payment
protection insurance and income protection products.
During the year, critical illness (CI) insurance was another product
we identified as higher-risk. We first reported our findings in August
2005. We had concerns about the use of scaremongering tactics, for
example saying ‘[there are] 100,000 cases of cancer each year’. Other concerns included unsubstantiated
claims and key terms and conditions (or exclusions) not being prominent enough. You can see more on
this on our web pages at www.fsa.gov.uk/financialpromotions.
In future, we will continue to actively monitor higher-risk products, namely CI, term assurance and
payment protection, while also monitoring promotions for other general insurance products. Where we
see financial promotions for higher-risk products that do not meet our requirements, we will use a
mixture of tools in a risk-based and proportionate manner, including asking the firm to amend or
withdraw the promotion.
We have generally taken a ‘graduated approach’ to our work. This means that where our initial research
identifies problems, we will work with the industry to tackle these issues. Enforcement action will only be
taken at this stage in the most serious cases. The next step will be follow-up work to identify whether our
messages have been received and acted upon. If, at this second stage, we find problems that have still
not been tackled, we will not hesitate to intervene by taking enforcement action.
Your comments, as always, are welcome. Please email us at firstname.lastname@example.org.
Head of Financial Promotions Department, FSA
HOTLINE – 08457 300 168
Many general insurance products are being promoted on the basis of price alone – either pricing of
premiums, or price-matching and savings claims – and consequently it is important that such price
information is clear, fair and not misleading.
We have seen many promotions which claim to offer a particular premium (for example “only £5.99 a
month!”) or a particular saving, or to match price (for example “save 20% on your home insurance”
and “If you can find a cheaper quote, we will match it and give you £50”). But these headline claims
can be unrepresentative of what most customers would be offered, or subject to significant
limitations, or both. We would not consider such promotions to be compliant.
We set out below some of the relevant issues to consider, and hope that these will assist firms to
produce promotions which are clear, fair and not misleading.
Who is the target audience?
Headline claims are obviously used to attract attention, but if very few of the target audience for that
promotion are likely to be able to obtain that rate, the claim can be misleading – therefore:
• premiums quoted in a promotion should be representative of the premium that would be charged to
consumers likely to respond to the promotion (the target audience) (ICOB 3.8.3G(4));
• where the premium quoted is not available to all members of the target audience, it should be
accompanied by a prominent statement making clear that it is an estimate only and the actual
premium will depend on individual circumstances (ICOB 3.8.3G(5)).
Claims of price-matching and savings
Some promotions claim to save on or match other product providers’ or distributors’ premiums. We have
received complaints from consumers who have responded to promotions that claimed to match or beat
other quotes, only to find that they are subject to undisclosed limitations. We would consider this to
be a breach of the clear, fair and not misleading requirement. Any claims, whether they are in
percentages or monetary values, should be clear, fair and not misleading:
• where a promotion implies that premiums can be reduced, that it can provide the cheapest premium
or that it can reduce a customer’s costs, then firms must provide a prominent statement explaining
the basis on which the savings can be achieved (ICOB 3.8.3G(6)) and disclose any significant
limitations on savings or the specific criteria which customers must meet, for example that the offer
is open to new customers only (ICOB 3.8.3G(7));
• firms should be able to substantiate all quotes and claims in line with ICOB 3.8.2E(1)(i).
Here are two examples of promotions, illustrating some of the issues we are seeing. We consider that
the first one would not – and the second one would – comply with our rules about substantiating and
explaining the basis of claims.
We have chosen to use a fictitious example of car insurance provided by the firm ZPQ Financial Services
and fictitious quotes.
DOES NOT explain and substantiate claims
Although the promotion claims to provide the
cheapest car insurance, with a 25% saving and
charge £75 a month for premiums, there is no
explanation about the basis on which the savings
can be achieved and any specific criteria. Also,
these figures are not representative of the business
expected to arise from the promotion. So, we would
not consider this promotion to be clear, fair and
DOES explain and substantiate claims
The promotion claims to provide cheaper car
insurance and this is substantiated in the table
showing competitor quotes. There is an explanation
about the basis of each quote under each customer
profile. There is also a prominent statement making
clear that the quotes are estimates only and the
actual premium will depend on individual
circumstances. The firm would of course need to
satisfy itself that the premiums quoted are
representative of the business expected to arise
from the promotion.
For more information on the requirements of ICOB 3, please see:
• our August 2005 M&GI bulletin: www.fsa.gov.uk/pubs/newsletters/fp_bulletin3.pdf
• ICOB 3: www.fsahandbook.info/FSA/html/handbook/ICOB/3
Our findings on protection circumstances. Where no precise quotation is
given, firms could think about including a
products prominent statement making clear that the
In the August 2005 M&GI bulletin quotation is an estimate and that the actual
(http://www.fsa.gov.uk/pubs/newsletters/ premium will depend on individual
fp_bulletin3.pdf), we presented the results of the circumstances (ICOB3.8.3G).
work we carried out on financial promotions for
• Some promotions for term assurance state that
critical illness insurance. Since then, we have
‘there is no cash-in value with term assurance’
completed a review of promotions for various
or words to that effect. Although firms are not
other protection products such as term assurance,
required to put in this statement, firms may
payment protection insurance (PPI) and income
wish to consider including it, where the product
protection products. We mainly looked at material
has no cash-in value.
from providers, including those selling directly.
• Any statement of fact, promise or prediction
There are some issues that firms might like to
should be clear, fair and not misleading
consider to assist them in producing promotions
(ICOB3.8.2E(1)(b)): For example, we
for these more complex products, which are
consider that it is not treating potential
clear, fair and not misleading:
customers fairly to give the impression in a
• Using small print to qualify prominent claims promotion for income protection insurance
may be misleading (ICOB3.8.3G). Much of that a policy will ‘secure your family’s
the press material for term assurance quotes future’ if the normal pay-out on such a
an example premium and level of cover for policy will not provide the sustainable level
an average person – but in some cases, small of capital or income that dependants might
print is used to provide further information expect given such a headline.
for the criteria.
The FSA is carrying out a wider project on PPI
• In a few term assurance promotions, the and you can see more at
promotion does not disclose that a quotation www.fsa.gov.uk/Pages/Library/Communication/
of premium will depend upon individual PR/2005/115.shtml.
White labelling in insurance products
Over the last year, we have seen a number of general insurance promotions which could mislead
consumers as to the identity of the insurance provider. A promotion from the distributor of the
insurance product should not give the impression that the insurance is provided by their firm, when,
in fact, it is provided by a separate insurance provider.
Unlike our rules on promotions for investment packaged products –
see www.fsa.gov.uk/Pages/Doing/Regulated/Promo/case/branding/index.shtml – the ICOB financial
promotion rules do not require firms to inform the customer of the insurance provider in the promotion
(unless firms are seeking to rely on the exemption contained in Article 24 of the Financial Promotion
Order 2005). However, where they do so inform the customer, their promotions should adhere to the
general overarching principle of being clear, fair and not misleading. In other words, the promotion
should not state or imply that the distributor is ‘the insurer’ or the provider of the insurance.
If the promotion – for example, a direct mailing – includes full product information, so that the
customer can fill in an application form or ring up and take out the contract without receiving any
further information before conclusion, these rules apply – ICOB 4 (status disclosure) and ICOB 5
(product disclosure). ICOB 4 requires the distributor to give the customer information about itself,
and ICOB 5.5.5R (2) requires the insurer’s name to be given in the policy summary. The distributor
cannot add its own name to the policy summary.
We are still seeing promotions for a variety of general insurance products that refer to the
General Insurance Standards Council (GISC). We now expect firms to have changed any standard
wording to reflect regulation by the FSA.