The Financial Services Authority (FSA) has
published new rules requiring banks and building societies to check whether
customers are eligible to claim on insurance cover before selling them a
packaged bank account.
This is particularly important on travel policies
where customers with existing health conditions or above the insurer’s age
limit would effectively be buying totally worthless cover and worse still, may
only find out that when they make a claim.
Packaged accounts are current accounts bundled up
with a range of insurance policies and other features such as overdraft
facilities or music downloads. In a market where one in five people now have
these products, the FSA wants to increase the level of consumer protection.
From 31 March 2013, banks and building societies
- Check whether the customer is eligible to claim
under each policy and share that information with them
- If the sales adviser is recommending policies in
the package they must establish whether each policy is suitable for the
customer and alert them if some are not
- Provide customers with an annual eligibility
statement setting out the requirements to claim each of the benefits under each
insurance policy in the package which should prompt customers to check whether
their circumstances have changed and whether the policies continue to meet
Sheila Nicoll of FSA says, "We are closely
monitoring the promotion of packaged bank accounts and the new rules will make
sure customers know what they are buying and that they can rely on the product
or have the limitations explained before buying."
The FSA is also consulting on further issues including a proposal that
annual eligibility statements should be sent to customers as a separate mailing
to give them added prominence, and that banks and building societies should
proactively tell customers who have triggered the age limit for claiming on the
travel insurance element, or warn them if they will do so before the next
statement is due.