Car salesmen cream off up to 70pc of add-on insurance fees

CAR buyers are being ripped off when they purchase add-on insurance at dealerships, the City watchdog has warned in its investigation of the insurance market.

Up to 70 per cent of the price of some types of car insurance – including guaranteed asset protection and “scratch and dent” policies – was going to forecourt salesmen as part of their commission, the Financial Conduct Authority said yesterday.

Its report found that across the wider general insurance market, too, consumers were being sold inappropriate products, paying too much and receiving poor service.

The FCA said it would intervene with firms and senior managers where it saw such failures.

Jonathan Davidson, executive director of retail and authorisations at the watchdog, said the issues were “widespread” and the watchdog would “not hesitate to use the full range of our regulatory powers”.

He added that “poor manufacturing, sales and distribution approaches” were leading to “low-value and inappropriate products, unfair treatment of claims and service issues”.

Hugh Savill, director of regulation at the Association of British Insurers, said the findings related to “a limited range of products, which make up a tiny part” of the market.

Most customers, who bought their insurance from a broker or comparison website, “should not be concerned with these findings”, he said.

However, there were “clearly remaining problems in some distribution chains” and it was important that these were addressed.