| Link(s): https://www.fca.org.uk/publications/research/discounts-cashbacks-soft-toys-general-insurance |
Context
In addition to its Policy Statement on General Insurance pricing practices the FCA has also released a Research Note on Discounts, Cashbacks, and Soft Toys: The Impact of Promotions on Consumer Decisions in the General Insurance Markets. In order to understand how promotions impact price comprehension and decision making in the GI market the FCA undertook an online experiment which simulated the purchase of insurance.
Key points to note
- The experiment aimed to answer three key questions:
- the impact of cash and non-cash promotions on consumer decision making (if any); and
- if promotions do affect consumers’ ability to choose the best insurance deal, to understand the mechanisms that drive this effect better; and
- to explore the individual impact of specific promotions, such as free gifts, nominal discounts, cashbacks and others, on decision making.
- During the experiment the FCA found that cash discounts and promotions that closely resemble cash, such as retail vouchers, loyalty points and cashbacks, significantly undermined participants’ ability to select the best insurance deal and correctly assess policy premiums.
- Participants in the experiment were particularly attracted to promotions that included a pound sign or a percent sign, and found discounts incorporated into the underlying policy prices challenging to evaluate.
Next actions
For Information only at this stage.