New rules for banks selling insurance in packaged accounts
by Gill Montia
From 31st March 2013, banks and building societies selling packaged accounts will have to adhere to new rules just published by the Financial Services Authority (FSA).
Around one in five UK adults have a packaged account, which is current account bundled up with a range of insurance policies and other features.
The regulator wants to increase the level of consumer protection in the market, so banks and building societies will have to:
1. Check whether the customer is eligible to claim under each policy and share that information with them.
2. If the sales adviser is recommending policies in the package, they must establish whether each policy is suitable for the customer and alert them if some are not.
3. Provide customers with an annual eligibility statement setting out the requirements to claim each of the benefits under each insurance policy in the package, which should prompt customers to check whether their circumstances have changed and whether the policies continue to meet their needs.
The FSA is also consulting on a proposal that annual eligibility statements should be sent to customers as a separate mailing so that they are more likely to get noticed, and that banks and building societies should proactively tell customers who have triggered the age limit for claiming on the travel insurance element, or warn them if they will do so before the next statement is due.
The FSA’s director of policy, Sheila Nicoll, comments: “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.”