The Financial Services Authority (FSA) has announced that it is proposing to introduce new rules governing the sale of insurance as part of ‘packaged’ accounts.
Packaged accounts are current accounts which include a number of additional benefits, such as travel insurance, breakdown cover and an interest-free overdraft up to a certain amount. Such accounts charge a monthly fee, which is typically around £10, although it can be as high as £25 in some cases. The FSA estimates that as many as one in five adults in the UK has a packaged account.
The FSA is proposing that banks and building societies selling packaged accounts which include insurance must:
- establish, where the sales adviser is recommending a packaged account, whether each policy is suitable for the customer and alert them if some are not;
- check whether the customer is eligible to claim under each policy and share that information with them; and
- provide customers with an annual eligibility statement prompting them to check whether their circumstances have changed and whether the policies continue to meet their needs.
Sheila Nicoll, the FSA’s director of policy, said, “For some people packaged accounts represent good value and convenience. But in other cases customers may find that the insurance cover they have paid for is useless.
“We are concerned that it may be too easy at the moment for firms to sell customers something they do not understand or need. We want to make sure that packaged accounts are only being sold to customers who have actively decided it is the right product for them.”
The FSA has published a consultation document on the proposals, which can be found at http://www.fsa.gov.uk/pages/Library/Policy/CP/2011/11_20.shtml. The consultation closes on 27 January 2012.
Partner Note
FSA press release, 27 October 2011. See http://www.fsa.gov.uk/pages/Library/Communication/PR/2011/088.shtml.
The consultation document can be found at http://www.fsa.gov.uk/pages/Library/Policy/CP/2011/11_20.shtml.