Banks and building societies must ensure customers are eligible to claim on insurance policies sold with packaged bank accounts under proposals put forward by the FSA.
Last week, the regulator published a consultation paper on new insurance conduct of business sourcebook rules for general insurance and protection policies sold as part of a packaged bank account.
A packaged bank account is typically a current account bundled with a range of insurance policies and access to preferential terms for services such as mortgages and overdrafts. The customer often pays a monthly account fee.
The FSA wants consumers to be able to make an informed decision about insurance sold as part of a packaged bank account. It also wants to limit the risk that consumers rely on the policies, only to later find out they are unable to claim. It is proposing that banks and building societies take reasonable steps to establish if a customer is eligible to claim on the insurance sold.
Firms will have to provide customers with an annual eligibility statement which sets out claim criteria and recommends customers review their circumstances and whether they would be able to claim. Firms selling on an advised basis will also have to consider the suitability of the insurance. Firms will have to keep a record of the suitability assessment and the eligibility assessment for at least three years.
The FSA estimates one-off costs to banks and building societies for implementing these rules will be £21m, with £13.5m worth of ongoing costs annually.
London & Country sales director Michael Aldridge says: “It is important to ensure there is depth in banks’ fact-finding to assess suitability. Banks and building societies have in the past not necessarily always been the best at properly assessing the suitability of their products.”