The UK’s Financial Services Authority (FSA) has identified three areas of potential consumer detriment in the general insurance market, and has warned the industry it will act to “stop issues escalating into mass consumer detriment”.

In its 2012 Retail Conduct Risk Outlook the regulator analyses the main risks which could face consumers of financial services products over the next 12 to18 months.

For general insurance, the FSA identifies as the main threats consumers purchasing on price without considering the difference in quality of product and post-sale charges; the sale of add-on products; and firms manufacturing products that are of little use to the customers who buy them.

One of the key trends underlying these risks is that in the economic downturn, UK consumers are shopping around more, which has heightened their focus on price.

But the FSA says it is concerned that, in insurance, price is not always a true reflection of the total cost to the consumer and that they may be unaware that not all products are the same.

“If consumers focus on buying the cheapest product, without understanding the scope of the cover, the product may not be value for money and consumers will suffer detriment if they later find they are unable to make a claim or that they could have bought better value cover elsewhere,” the report says.

The economic climate in the UK is also contributing to the other black spots identified in general insurance, with profit pressures adding to the potential for insurers to create unnecessary products and sell add-on products customers don’t need.

Meanwhile, FSA CEO Hector Sants has announced his intention to retire at the end of June.