Cashback incentives are very often the topic of enquiries from readers who feel that they are at a disadvantage to mostly direct marketing companies who offer partial premium refunds to secure business.
The latest proposals regarding changes to the General Code of Conduct contains the following guidelines for providers who want to continue offering such services.
Loyalty benefits or bonuses
|(a)||An advertisement that references a loyalty benefit (including so-called cash- or premium back bonuses in relation to insurance policies) or no-claim bonus must not create the impression that such benefit or bonus is free and must adequately –|
|(i)||indicate if the loyalty benefit or no-claim bonus is optional or not; and|
|(ii)||regardless of whether or not the loyalty benefit or no-claim bonus is optional, express the cost of the benefit or bonus including, where applicable, the impact that such cost has on the premium or investment amount, unless the impact is negligible; and|
|(iii)||identify the granter of the benefit or bonus.|
|(b)||For purposes of subsection (13)(a)-|
|(i)||the impact is deemed to be negligible if the cost of the loyalty benefit or no-claim bonus comprises less than 10% of the total premium or investment amount payable under a financial product.|
|(ii)||where the impact of a loyalty benefit or no-claim bonus is not negligible and where the advertisement refers to the actual premium or investment amount payable –|
|(aa)||the cost of the benefit or bonus must be shown as a percentage of that premium or investment amount; and|
|(bb)||the provider must be able to demonstrate that the premium or investment amount and benefit cost used in the advertisement presents a true reflection of the cost impact for the average targeted client; and|
|(iii)||where the impact of a loyalty benefit or no-claim bonus is not negligible and where the advertisement does not refer to the actual premium or investment amount payable, the average cost of the benefit or bonus as a percentage of premium or investment amount must be provided.|
|(c)||Where an advertisement highlights a loyalty benefit or no-claims bonus as a significant feature of a financial product or financial service and makes reference to a projected loyalty benefit value or no-claim bonus value that is payable on the expiry of a period in the future, it must also express the value of the projected benefit or bonus in present value terms, using reasonable assumptions about inflation.|
|(d)||An advertisement must clearly state whether the availability or extent of a loyalty benefit or no-claims bonus is contingent on future actions of the client or any factors not within the client’s control.|
|(e)||An advertisement may not create the impression that the bonus or benefit is guaranteed or more likely to materialise than the provider or product supplier reasonably expects for the average targeted client.|
Will this level the playing field? Time will tell. It is not so much the rules, as the application thereof, which determines the final outcome.