Banks and building societies will be required to check whether customers are eligible to claim on insurance policies sold as part of packaged accounts under new FSA rules.
One in five consumers holds a packaged bank account, where a current account is bundled up with insurance and other features such as overdraft facilities or music downloads.
From 31 March next year, banks and building societies will have to check whether customers being sold packaged accounts are able to claim on insurance sold as part of the package.
Sales staff recommending the policies must establish whether each policy is suitable for the customer and inform them if the policies are unsuitable.
Banks and building societies will also be required to give customers an annual eligibility statement setting out the claim requirements for the policies under the package. The FSA hopes this requirement will prompt customers to check whether their circumstances have changed and whether policies continue to meet their needs.
In addition to the new rules, the FSA is consulting on whether annual eligibility statements should be sent as a separate mailing to customers to highlight their importance.
The regulator is also considering forcing banks and building societies to inform customers who have triggered the age limit for claiming on travel insurance sold as part of a packaged account, or warn customers if they will go over the age limit before the next statement is due.
The FSA says it plans to monitor the promotion of packaged accounts where monthly costs are advertised alongside yearly benefits.
FSA director of conduct policy Sheila Nicoll (pictured) says: “These products are often referred to as upgraded accounts but if you end up paying for an element you cannot claim on, it is money down the drain.
“We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure customers know what they are buying and that they can rely on the product or have the limitations explained before buying.”
Roxburgh Financial Management branch manager Garry Webb says: “Protection needs to be based on advice, it should not be sold as part of packaged deal with a monthly cost. The inference is the client has cover in place irrespective of their personal circumstances, which is wholly incorrect.”