The Financial Conduct Authority is reviewing the sale of add-on insurance for items such as cars, TVs and phones, including extended warranties.
The study, a step away from a formal investigation, comes amid fears that a lack of competition is leading to customers paying too much to insure items they have just bought (see Free Warranties for how to get peace of mind for less).
The review will look at how competition works in the market, whether the products represent good value for money and whether consumers understand what they are buying.
FCA chief executive Martin Wheatley talked about the watchdog's review at an Association of British Insurers conference today.
Separately, the Office of Fair Trading will soon launch a comparison site for extended warranties.