• Doing business with the FSA
  • Being regulated
    • Financial promotions
      • Thematic reviews

Promotions which do not give fair and adequate information about savings claims may induce consumers into contacting companies on a misleading basis. Cumulatively, misleading promotions can distort the market in that it becomes harder for consumers to compare deals and pushes other advertisers to test the boundaries of what is acceptable.

As we have repeatedly made clear, the responsibility to ensure that advertisements are clear, fair and not misleading and thus that consumers are being treated fairly lies squarely with firms' senior management. This obligation cannot be delegated solely to firms' compliance functions and we will continue to look for highly visible leadership by senior management in this area.

Summary

• In January we reported our concern that too many promotions provided a general impression in relation to savings claims which did not match the experience of the consumers responding. Our review then found that 45% of home and motor insurance promotions failed to provide any evidence as to how claimed savings would be achieved (this equated to deficiencies in 57% of motor insurance promotions and 25% of home insurance promotions).
• We also said in January that we would repeat our review in three months' time. Our April review has shown significant improvements in standards in that 94% of advertisements now accurately described any savings claims made, meaning that the deficient advertising had fallen from 45% to 6% in the period January to April.
• We expect standards to remain consistently high and be applied in all future marketing campaigns and across all media including television, radio, the internet and outdoor advertising. We will be watching to make sure this happens.

Background: January review

In January 2007 we set out the following questions for firms to consider which remain relevant:

• Is there a mismatch between the general impression created by the promotion and the experience of the target customer?
• Is the price/savings claim referred to in the promotion representative of what the target customer is likely to benefit from?
• Does the promotion outline with sufficient clarity the basis on which such saving is to be achieved, with equal prominence to the savings claim?

View our requirements for financial promotions of general insurance products and the outcome of the FSA's previous review.

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April 2007 review

In April 2007 we reviewed all home and motor insurance financial promotions issued in the national press over a ten-day period. Home and motor adverts were reviewed because of the failings found in these areas in our previous review.

Over this period, 28 firms issued 49 different financial promotions. There has been a significant improvement in the standard of these adverts, with virtually all now creating general expectations that are much more likely to match the experience of the consumer.

The improvement in the general standard of financial promotions has been achieved by firms in two distinct ways.

First, those firms continuing to use monetary 'savings claims' in their promotions are now making their claims clearer to consumers – firms are using representative figures and/or setting out the basis for their claims in their adverts.

• 6% of financial promotions issued during the review period contained misleading 'savings claims'. This compares to the 45% of promotions identified in our January 2007 review.
• While these deficient promotions set out the basis of the claim, such information is included with much less impact than the 'savings claim'. We have told these firms to take immediate steps to address our concerns.

Second, we have seen firms move away from using monetary 'savings claims' in their promotions preferring to emphasise other benefits available instead. For example, we have seen marketing campaigns that focus on:

• Percentage discounts offered on premiums for consumers meeting certain requirements. These discounts are often available for consumers who:


• have a specific number of years no claims discount;
• buy online; or
• buy contents and buildings cover together.
• Guarantees to beat consumers' renewal quotes and/or offer money back.

Obviously, such claims also raise consumer expectations and firms must ensure that these expectations are being met by the consumers' experience.

Next steps for firms

Firms need to maintain the standard of their press promotions and ensure that lessons learnt are applied in all future marketing campaigns and across all media including television, radio, the internet and outdoor advertising. We realise certain media have longer lead-in times and changing such promotions will inevitably take more time, but amendments must be made within a short time frame agreed with the FSA. We will continue to monitor press promotions closely and will be assessing other media to ensure the lessons learnt are being carried over. We expect our standards to be reflected across all media by September 2007.

What matters to us going forward

A more principles-based and outcome-focused approach encourages senior management to focus more on producing fair outcomes for consumers. It provides senior management with greater flexibility and with greater scope to compete and innovate in their advertising. Core to such responsibility is for senior management to ensure that treating customers fairly is being embedded across the business, including in those areas responsible for the firms' marketing.

In order that the consumer expectations set by adverts will be met by their experience, senior management of firms should be considering:

• how information is shared between their Marketing and Compliance functions. This will ensure their insurance products and services are designed to meet the needs of identified consumer groups and are targeted accordingly.
• how this collaboration should be achieved so that, for example, from the outset the marketing design is based on setting fair consumer expectations. It is difficult to see how marketing can work effectively if the responsibility to produce clear, fair and not misleading promotions is given solely to the compliance function.

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