Has the EU killed off inertia selling...?

The European Court of Justice (ECJ) recently ruled that airlines cannot automatically include travel insurance in online prices stating that the insurance charge was an 'optional price supplement' that should not be automatically imposed. 

This outcome should come as no surprise to anyone (other than the defendants) given that under the new EU Consumer Rights Directive (CRD) - which is to be implemented in all EU member states by 2014 - the annoying practice by online retailers to use 'pre-ticked' boxes to achieve a secondary sale is to be outlawed.

However, what is of interest with this case is the fact that the outcome indirectly addresses the sale of online insurance products thereby extending the reach of the CRD to excluded contracts such as financial services, timeshare and package holiday contracts. 

Given the growing importance of online sales in today's fast-paced global economy, there has been a maturing of the 'slight-of-hand' techniques (known as inertia selling) utilised by online retailers to boost core sales through linked supplementary products such as insurance . These sales tactics work on the basis that unless the buyer opts-out then they are deemed to have accepted (and are willing to pay for) the supplementary product. This psychological sales technique plays on the fact that online customers are focused on their primary purchase e.g. airline ticket, hotel room etc. and give scant notice of the various 'disclaimer boxes' some of which include opt-out purchase options.

While the most high-profile case of inertia selling has been payment protection insurance, bundled in with loans, there are plenty more inertia-exploiting deals still around. These include tacking premium protection onto life insurance, which will pay out if you can't pay the premiums for six months. Given that life insurance premiums are often as little as €10 a month, and that premium insurance costs €2-€3 a month on top, you could end up paying more for the cover than you would receive as a benefit.

Then there's mobile phone insurance, often cited as a poor deal. Vodafone, for example, offers customers three months free insurance. After three months, customers have to call to cancel the policy or they are charged. The power of inertia selling is clear from the fact that 49% of those with a phone contract (and therefore susceptible to inertia selling) have the insurance, compared to 21% of pay-as-you-go customers.

In theory, the ECJ ruling, coupled with the soon to be implemented CRD should force online retailers to abandon these inertia sales techniques and boost confidence in online sales. However, as with all legislative changes, a key question remains... How hard will it be to get a refund if this new legislation is either ignored by retailers and/or there is no unified approach to enforcement? 

Not so much an issue of the devil being in the details but more a case of the EU needing to ensure that breeches of this new legislation are addressed quickly at member state level with suitable fines and penalties that must outweigh the economic benefits generated by such breeches.