The Financial Services Authority (FSA) has proposed new rules to make sure s check customers are eligible to claim on insurance cover before selling them a packaged bank account.
Packaged accounts are current accounts bundled up with a range of insurance policies. The FSA estimates that one in five of the UK adult population now has one of these accounts, and although some customers can get value from the package, others may not.
The regulator proposes that banks selling insurance as part of a packaged account must:
Check whether the customer is eligible to claim under each policy and share that information with them;
Provide customers with an annual eligibility statement prompting them to check whether their circumstances have changed and whether the policies continue to meet their needs, and;
If the sales adviser is recommending a packaged account they must establish whether each policy is suitable for the customer and alert them if some are not.
Sheila Nicoll of the FSA says, “For some people packaged accounts represent good value and convenience. But in other cases customers may find that the insurance cover they have paid for is useless. We are concerned that it is too easy at the moment for banks to sell customers something they do not understand or need. We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them.”
Travel is a common insurance added to bank packages and customers can get a nasty surprise when making a claim that they are not eligible due to age, illness, activities or location.
Richard Lloyd of Which? comments, "One in three do not use any of the benefits offered with packaged current accounts. People should only have a packaged account if they are absolutely certain that it will be cheaper for them and they will use all of the separate benefits offered. Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare."