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FSA takes action over packaged bank accounts

The FSA has called for banks and building societies to check customers are eligible to 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 products such as ticket discounts.  

The FSA estimates that one in five of the UK adult population now has one of these accounts, but says that while some customers can get value from the package others may not.  

The regulator has published a consultation paper today which proposes that banks and building societies selling insurance as part of a packaged account must check whether the customer is eligible to claim under each policy and share that information with them.

Banks and building societies will also have to  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.

If the sales adviser is recommending a packaged account they must establish whether each policy is suitable for the customer and alert them if some are not.

FSA director of policy Sheila Nicoll says: “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 also requested feedback on how to improve price transparency of packaged accounts.

Firms buy insurance policies wholesale and offer them at discounted rates in the overall package. This makes it difficult for customers to compare and contrast the costs with standalone insurance products or other bank accounts.

The consultation closes on January 27.


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There are 14 comments at the moment, we would love to hear your opinion too.

  1. At long last, as a former ‘rats nest’ employee we were heavily ‘incentivised’ to push these on to anybody who walked in. NO matter whether they would use them or not, particularly foreigners and those who were ‘challenged’. Well done FSA at last !!

  2. Recently had a client who went on holiday with the backup of her Ulster Bank / RBS travel insurance provided by her packaged bank account. She had her mobile phone stolen and tried to make a claim. The policy had a £65 excess and maximum insured item value for mobile phones of £100. Yes, £35 claim was the maximum. Thankfully she never need any hospital treatment whilst abroad – probably would pay for the bed but not the doctor. Best news was that the home insurance policy I arranged did cover her smartphone and she recieved £400 in the post.

  3. Stephen @ Create Wealth Management Ltd 27th October 2011 at 10:35 am

    What about packaged ‘savings’ accounts? A far bigger mis-selling issue yet to break. Promises of higher savings/interest rate returns where monies a split between accounts and structured investment plans. We’ve already come accross several who had no idea what they’d ‘bought’! Where are you now FSA?

  4. “We are concerned that it maybe 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.”

    How about consumers being responsible for their own decisions. When will we all be allowed to grow up and the FSA apron strings be cut.

    Surely the FSA needs to devote resources to more important stuff.

  5. Surely the customers can make some effort to find out whether or not the account package is worthwhile or do some of them really have such a lack of intellectual acuity ?

    If the latter then is it any wonder this country is in such a state with its finances ?

  6. I have to have a chuckle!! I have had a packaged bank account in the past and read the information before signing up for it. I knew which parts of the account would be useful to me and which would not. I did not need anyone telling me what would be worthless, I can read! I made a calculation and, on balance, decided to take it. Ultimately, I was upgraded to ‘Premier’ which gave me packaged ingredients ‘free’.

    There surely has to be some element of caveat emptor?! These accounts are not complex, are they?

    The FSA have been working on this for over 18 months. Taking a balanced view I personally feel this has been a waste of their time. I think banks may have bigger issues that packaged accounts.

  7. Following up from my recent post, Andrew and Melanie, I agree fully with your comments. Well put.

  8. Re gaazza at 10:41
    Yes, I understand what you are saying “There surely has to be some element of caveat emptor”, but the fact is that these ‘packages’ are foisted upon those in society who, for whatever reason, could be described as ‘vulnerable’.
    These ‘vulnerable’ people will, in all likelihood, either trust their bank implicitly or be taken in by a headline rate of interest (applying perhaps to the first £2,500 of savings) and so be an ‘easy’ sell. These ‘vulnerable’ people will not generally be savvy enough to work out whether the package is good for them (it rarely is).
    So, YES, the FSA is right here – only years and years too late, as always.

  9. I think the FSA are right on this.Too many times customers are provided insurance add ons wihch may appear ‘simple’ but the only time they really know what they have is when they need to claim.Then it all comes out in the wash.

    There is too much emphasis on insurance products sold on cost alone in the UK as if ‘they all do the same thing’.

    Look at a typical car insurance policy – does anyone really know what can happen at the point of a claim? No, the reality is they haven’t a clue beyond the very basics.Thats because the general public believe the only real difference is cost.

  10. I often buy packets of Starburst (Opel fruits) my problem is that I don’t like the Strawberry ones. Shall I make a complaint against the regulator FSA (Food Standards Agency).

    Many staff of Banks and Building societies have these accounts since they can be excellent value. There are no long term ‘lock ins’ with most of these accounts.

  11. Using the food theme, if I buy a Snikers, Bob, the man who runs my local newsagent, doesnt check to see if im alergic to peanuts, I dont sign a disclaimer, and I dont need a full product summary, with a range of options (for example, Mars or perhaps a sensible KitKat Chunky?)

    People need to take ownership of their own actions, read what they sign and weight up decisions. Weve done it for hundreds of years until our recent need for litigation at the drop of a hat

  12. Don't rock the boat! 27th October 2011 at 12:35 pm

    Whilst Athens and Rome burn, the FSA dances on the head of a pin.

  13. To Melanie: “Surely the customers can make some effort to find out whether or not the account package is worthwhile or do some of them really have such a lack of intellectual acuity ?”

    Sadly, the answer to this is a resounding “YES”. For once, and about time, the FSA is targetting its resources in the right direction. The mis-sale of these products follows excactly the same principle as PPI misselling. The individual amounts may be smaller but the volume is vast.

  14. Sorry but I think this is long overdue, an average premium account is going to cost a customer approx £300 per year. If that person doesnt drive, travel abroad etc then why would they need it? Also there is no consideration for existing insurance and the pros and cons of switching (try doing this with a term assurance and see how far you get on your audit). A simple list of questions such as do you have x? or do you go abroad for your holidays is all it would take.

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