As of March 31 next year, banks and building societies must check whether customers are eligible to claim on insurance cover before selling them a packaged product.
A packaged product is a current account bundled up with insurance policies, overdraft features and added extras such as music downloads. The FSA has taken steps to monitor them more closely because one in five consumers now has a packaged bank account, so more consumer protection is needed.
Action point: For more on different bank accounts, visit our guide Finding the right bank account.
The new rules for packaged current accounts
From March 31 2013, banks and building societies must:
- Check whether the customer is eligible to claim under each policy and make sure they know that information.
- Establish whether each policy is suitable for the consumer and alert them if some are not.
- Provide customers with annual eligibility statements. These will set out what they need to do to claim each benefit under each insurance policy in the package. This should prompt customers to check if the policies still fit their needs when their circumstances change.
Further issues on packaged current accounts
The FSA is also looking at the possibility of sending annual eligibility statements to consumers as a separate mailing so that they’re more prominent and people don’t miss any important information.
It would also like banks and building societies to make sure people know when they’re approaching the age limit for claiming on travel insurance.
Which? wants greater transparency on packaged current accounts
Peter Vicary-Smith, chief executive of Which?, says: ‘This is a welcome first step in helping to stop people being sold policies that they don’t need or can’t use.
‘Banks should only be able sell these accounts where it’s appropriate and people are eligible to claim all of the benefits. Some people are paying over £300 a year for benefits that they may never need.
‘We want to see greater transparency from the banks so their customers can see clearly what is included in a policy and the costs so they can easily judge whether it is the right policy for them.’
‘The regulator must also be a proactive watchdog for consumers and prevent banks linking staff bonuses to the sale of these products; the mis-selling scandals of recent years must never be repeated.’