New Rules on Packaged Accounts Published
A new Financial Services Authority ruling is requiring banks and building societies to check whether 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 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.
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.
From 31 March 2013, banks and building societies must 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.
The new set of rules also require banks and building societies to provide customers with an annual eligibility statement. This sets 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 their needs.
Sheila Nicoll, FSA director of policy, said: “These products are often referred to as upgraded accounts but if you end up paying for an element you can’t claim on, it’s money down the drain.
“We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure customers know what they’re buying and that they can rely on the product or have the limitations explained before buying.”
The FSA is also consulting on a proposal that annual eligibility statements should be sent to customers as a separate mailing to give them added prominence.
The regulator is considering whether 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.
Another area the FSA intends to monitor is the promotion of packaged accounts where monthly costs are advertised alongside yearly benefits.