At present, many car and home insurance deals offer niche insurance cover (such as legal expenses insurance) as part of the bundle, and require customers actively to opt out of the sale by unticking a pre-ticked box.

However, the FCA is moving to prohibit this type of activity after finding that one in five consumers don’t realise they’re buying the product – inadvertently wasting over £100m collectively every year.

Default insurance sales by airlines, concert promoters and hotels (among others) were banned two years ago as part of the latest Consumer Contracts Regulations – however, the FCA has found that some prohibited suppliers were still not adhering to the rules.

For instance, Ryanair maintained a ‘pre-ticked’ box on its booking pages – only if a consumer clicks a separate ‘don’t insure me’ button could they book a flight without purchasing insurance into the bundle. The airline was fined €850,000 last year by Italian authorities for “unfair commercial practices”. The authorities noted that those who did not wish to buy insurance from Ryanair were obliged to select a ‘No Grazie’ box, which was secreted between Malta and Norway in the destinations menu. .

The new ban will also oblige product and services providers that offer insurance as part of overall contractual deals (such as mobile phone providers and car showrooms) to advertise annual insurance costs, rather than monthly prices.  The Financial Ombudsman Service recently announced that it had identified numerous cases of mobile phone buyers unknowingly buying insurance costing over £70 annually due to monthly costs being mistaken for yearly fees.

“This is about ensuring consumers can make the right decision on what add-on insurance they do or don’t need,” said Christopher Woolard, director of strategy and competition at the FCA. “Forgetting to untick a box at the end of a purchase is not making an informed choice.”

“Our research shows that the opt-out model means that often consumers are buying a product when they have not been able to give any thought to whether or not they need it.”

Following the FCA announcement, Brokers Shore Capital (BSC) marked a number of consumer insurance providers as “sell”. Eamonn Flanagan, an analyst at BSC, said that the new regulations would “likely reduce penetration and conversion rates of such products, a significant element of the total profitability of the personal lines insurers. The focus on the poor value offered by such products is likely to negatively impact margins which were over 75 per cent for each of the major personal lines insurers.”