Passing customer information around can be lucrative, but the FSA is watching with interest, says John Jackson
The manner in which customers are treated by insurers, bankers - and bancassurers - is taking a high profile, with the FSA and the British Bankers' Association (BBA) both heavily involved.
The sensitive issue of passing on personal data has been highlighted with one disgruntled customer of Lloyds TSB complaining, with the backing of the bank's trade union, about information on him being passed to the bank's call centre in India.
The customer claims that the action breaches the Data Protection Act, which prohibits sending personal information outside the EU. So, it is OK to send a customer's personal data to Prague, Warsaw and Bologna, but not to Delhi, Bombay or Calcutta.
Lloyds TSB has firmly denied any wrongdoing, and has said the data being transferred is safe. If the case should succeed, it could affect overseas call centre business.
The FSA recently published a report, Treating customers fairly - progress and next steps, which reviewed the progress firms had made in implementing its rules on customers.
As a follow-up, it has set up a consultative group to examine what treating consumers fairly means and how firms can develop a better understanding of what makes for good or bad practice.
The BBA's Banking code review report, headed by an independent reviewer, is due to be published this month, with a new code to come into force next March.
It is right that banks and bancassurers should be able to use their databases for internal marketing, but if they act as intermediaries to persuade customers to take out insurance with third parties, then that is a different matter.
Acting as a broker in this respect should mean the bancassurers should seek FSA authorisation for such activities - provided, of course, their actions do not breach the Data Protection Act.
In particular, the small firm - often a self-employed individual - is a particularly lucrative market. According to the Department of Trade and Industry, the small and medium enterprise (SME) market grew by 4% in 2002 - largely through more people becoming self-employed - and the BBA has revealed that lending to SMEs rose by £1.2bn in the first quarter of this year.
The BBA says its members have 4.6 million small business accounts, with around 480,000 start-ups last year. In the first quarter of this year there were around 114,000 new businesses for which banks provided services.
Little wonder, then, that British Gas is looking for insurer partners so it can trawl its 650,000 business database to sell SME products. Even more rubbish turning up with the gas bill.
If the customer - individual or small business - is to be adequately protected, then the issue of what information is passed around, even within companies, needs careful scrutiny.
Both the FSA and the BBA are at least on the right track in seeking to examine the issue of consumer protection. But it is an area the broker market needs to keep a wary eye on as well.