Affinity insurance: the model’s downsides

Despite its appeal and rapid growth, affinity insurance faces many challenges. It is considered one of the most criticized insurance products due to its lack of clarity and commercial abuse, with figures corroborating such criticism.

In France, according to the Directorate-General for Competition Policy, Consumer Affairs, and Fraud Control (DGCCRF) ⁽¹⁾, nearly 30% of customers say they did not understand or want to underwrite an affinity insurance policy, and nearly 40% are unaware of the exact coverage included in their contract.

These malfunctions, which had long been tolerated, eventually drew the attention of regulators, mainly in Europe.

⁽¹⁾ French consumer protection organization.

Forced sales and automatic subscriptions

Forced sales practices and "opt-out" subscriptions ⁽²⁾ remain common. These are insurance options that are pre-selected or presented in an enticing manner at the time of purchasing a product (telephone, ticket, household appliance).

Some consumers subscribe to these services without realizing it. There are two types of opt-out:

• Active opt-out: the user must check a pre-checked box to refuse the subscription.
• Passive opt-out: after automatic registration, the user must then manually unsubscribe. This is the case at several points of sale and e-commerce sites where the insurance box is checked by default, requiring the consumer to manually uncheck it.

In 2022, the DGCCRF noted that nearly one in five purchases of telephony or electronic products included insurance that was either imposed or insufficiently explained.

This silent membership system fuels a high level of dissatisfaction. According to a survey conducted in 2023 by the Fédération des Garanties et Assurances Affinitaires (FG2A) ⁽³⁾, one in four customers said they subsequently discovered that they were paying for additional coverage, often billed at between 3 EUR and 10 EUR per month. Although seemingly modest, these amounts represent more than 120 EUR per year for some consumers, a cost comparable to that of basic home insurance.

⁽²⁾ Opt-out membership means that a person is automatically enrolled in a list (e-mails, text messages, etc.) or a service (additional warranty, insurance, etc.) by default, and must take explicit action to unsubscribe.

⁽³⁾ The Fédération des Garanties et Assurances Affinitaires (FG2A) is a French association established in April 2012. The FG2A aims to guarantee professional ethics and strengthen consumer confidence.

High premiums

One of the issues often raised is the amount of the premium which seems high in view of the coverage actually offered. Affinity insurance covers specific risks (breakage, theft, cancellation, etc.) but includes numerous exclusions or strict conditions.

In addition, the premium can represent a significant portion of the price of the insured item (sometimes 10 to 20% or more), while the probability of making a claim is low.

Redundant products

Another recurring problem is the duplication of coverage whereby many customers pay several times for the same coverage. This redundancy is particularly common in insurance schemes as in:

• theft or damage already included in home insurance,
• travel already covered by certain credit cards,
• construction.

In these cases, affinity insurance represents an additional cost for protection that already exists.

A 2023 study by FG2A reveals that 36% of affinity insurance holders admit to having at least one active duplicate policy. The 2024 report by the French Insurance Federation (FFA) estimates the overall additional cost to French households at nearly 1.2 billion EUR per year.

In North Africa, where banking services remain limited, these duplicates, which are less frequent, pertain mainly to products purchased via mobile money offered by telephone operators or e-commerce providers.

In 2023, for example, the Moroccan authorities recorded nearly 12 000 complaints related to unjustified or redundant charges for embedded insurance.

Restrictive clauses and low compensation

One of the major criticisms levelled at the affinity model pertains to the complexity of the exclusion conditions. Under the promise of “comprehensive protection,” contracts often exclude the most common cases: negligence, forgetfulness, wear and tear, and lack of maintenance.

In France, the FG2A estimates that the average claim coverage rate is between 55% and 65%, compared to 75% to 80% for traditional insurance contracts. In the travel sector, the compensation refusal rate sometimes reaches 40%, mainly for unrecognized reasons such as delays, strikes, and professional impediments.

This lack of transparency is fueling growing dissatisfaction. According to the IFOP ⁽⁴⁾ 2024 barometer, 62% of affinity policyholders consider the conditions to be “too vague or restrictive,” while 28% have already given up on filing a claim for fear of being denied compensation.

(4) The IFOP Group, historically the French Institute of Public Opinion founded in 1938, is a company that conducts opinion polls, marketing studies, and societal trend analyses to help brands and institutions anticipate change.

Business credibility

The impact of deception and fraud on the reputation of affinity businesses is considerable. According to a study conducted by Deloitte, overall confidence in this sector in Europe has fallen by 12 points since 2019, from 68% to 56% of positive opinions in 2024.

This mistrust is reflected in an increase in litigation. In France, the Insurance Ombudsman recorded nearly 16 000 referrals in 2023, a quarter of which pertained to affinity products.