The FSA estimates that one in five of the UK adult population now has one of these accounts, and although some customers can get value from the package, others may not.
Today’s consultation document 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;
- 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, and;
- 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.
Sheila Nicoll, FSA director of policy:
“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 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.”
The FSA is also asking for more 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.
Which? executive director, Richard Lloyd, says:
“Which? has found that a third of people don’t use any of the benefits offered with packaged current accounts. This means that they’re wasting between £240m and £320m in bank fees each year.
“We're pleased that the FSA has investigated this and is proposing further action. People should only have a packaged account if they’re absolutely certain that it will be cheaper for them and they’ll use all of the separate benefits offered.
"Banks have a responsibility to make packaged accounts more transparent by clearly explaining what each of the individual elements are worth, so customers can compare.”
Sarah Brooks, Director of Financial Services at Consumer Focus, said:
"It is right that the FSA looks at whether customers are getting a fair deal on packaged accounts. We have raised our concerns with the FSA that many consumers may have been mis-sold accounts which mean they pay for extras they don't actually need or use.
"The last thing this market needs is another mis-selling scandal following on from PPI. Consumers need to able to trust banks to sell them products that are right for them. They need good advice and customer service.
"It is welcome that the FSA are proposing action on requiring checks on insurance eligibility - as insurance forms a big part of many packaged account benefits."
