Insurance sold alongside another purchase, whose margin comes from the absence of comparison rather than from the quality of the cover.
Add-on insurance is sold at the moment of another transaction, a loan, a trip, the purchase of a device, the hire of a vehicle, and all its economic features flow from that moment. The buyer is captive, does not compare, decides in seconds and extends to the product the trust placed in the main seller. The result is margin rates far above those of the same cover sold separately, and loss ratios sometimes so low that they call the usefulness of the cover into question, with a notable share of policyholders turning out to be ineligible for the benefit they paid for. Conduct regulators addressed the subject through three successive levers: a mandatory pause between the main sale and the add-on sale, a product governance duty requiring demonstration of suitability for a target market, and a value test comparing premium to benefits actually paid. The mass litigation that followed the sale of unsuitable payment protection insurance remains the reference point for the cost of a distribution failure.
In the United Kingdom, the mass litigation over payment protection insurance sold alongside credit led firms to pay more than 38 billion pounds in redress, with the regulator setting 29 August 2019 as the deadline for claims.
add-on insurance, vente liée, produit d'assurance accessoire, tied selling