Regulator wants to ramp up consumer protection
The FSA has published new rules requiring banks and building societies to check if customers can 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.
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
- Check that policies are suitable for the customer if these are recommended by a sales advisor, and alert the consumer if some are not
- Give customers an annual eligibility statement setting out the requirements to claim each of the benefits under each insurance policy in the package
FSA director of policy Sheila Nicoll 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 regulator is also consulting on whether banks and building societies should be proactive in telling customers when they have become to old to claim on the travel insurance sections of packaged accounts, or to warn them if this is likely.