FSA Warns Insurers Over Savings Claims

by Philip Morton, Investors Offshore.com

18 January 2007

The UK's Financial Services Authority (FSA) on Tuesday warned insurance firms to stop using savings claims which could mislead consumers in their advertising, or face regulatory action.

The warning followed a review of press advertisements from 57 firms selling motor, home and travel insurance which accounted for more than three quarters of the press advertising spend in these areas during 2006.

The FSA found that more than half of motor insurance advertisements with savings claims were either unclear or misleading. It also had the same concerns with a quarter of the home insurance advertisements. Travel insurance saving claims were generally of a higher standard than the others.

The financial regulator argued that insurance advertisements can be misleading if they give the impression that most consumers are eligible for such savings when in fact only a few are. They can also be unclear if the basis of the savings claim is not clearly set out.

Vernon Everitt, FSA Retail Themes Director, explained:

"Most people rely on some form of insurance to protect them and advertising is a major influence on what they choose to buy. So it must be clear, fair and not misleading, leaving people with a balanced picture of what's on offer. This work demonstrates that firms in the home, travel and car insurance markets must shape up and ensure that the claims they make don't mislead. We will be back in three months to assess progress and will then decide whether further regulatory action is needed."

The FSA revealed that it has contacted the senior management of firms with which it had concerns, requiring them to improve the quality of their advertising, and will repeat its review in three months' time.

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