Customer Protection in Packaged Account Market Propped Up
The Financial Services Authority (FSA) has proposed new rules to make sure banks and building societies 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 and other products such as ticket discounts.
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 consultation document proposes that banks and building societies 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, FSA director of policy, said: “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 maybe too easy at the moment for firms 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.”
The FSA is also asking for more feedback on how to improve price transparency of packaged accounts. Firms buy insurance policies wholesale and offer them at discounted rates in the overall package.
This makes it difficult for customers to compare and contrast the costs with standalone insurance products or other bank accounts.