FSA’s proposed new rules on packaged accounts could hit sales
New FSA rules on packaged insurance products will result in a fall in sales of such accounts, regulatory experts have predicted.
The 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.
PwC regulatory practice David Morey said: “The enhanced sales process and the suitability assessment will inevitably mean that the volume of packaged account sales falls. However, it should also mean that customers buying these products get a better deal, which itself will enhance customer trust and loyalty.”
He said that the rules would force banks to re-engineer their sales processes, and remuneration arrangements to ensure that sales of packaged accounts can be shown to be suitable for customers’ needs. Morey added that some packaged accounts would need to be simplified.
Law firm Beachcroft financial services partner Mathew Rutter warned that banks would find it more difficult to sell insurance as part of packaged accounts if the new rules are implemented.
He said: “These proposed new rules are evidence of how the pendulum has swung back from more principles-based regulation to the use of detailed rules. If implemented as proposed, they would put a significant hurdle in the way of selling insurance as part of a packaged bank account.
“The proposals go beyond just saying that the customer must be given clear information about the terms of the insurance and any limitations. The FSA proposes an express obligation to take reasonable steps to establish whether the customer is eligible to claim each of the benefits under a policy sold in this way. There is a strong element of “nanny FSA” about these proposed rules, but after PPI and other concerns around mis-selling this is symptomatic of how the FSA is now approaching the sale of relatively mainstream financial products.”