FSA plans insurance overhaul of banks and building societies

The FSA has proposed new rules to make sure banks and building societies 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, and has warned that some customers may not get any value from them.

An FSA 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
• Annually prompt customers to check if the policies still meet their needs and if their circumstances have changed
• Have a sales adviser that is recommending a packaged account check that each policy is right for the customer and alert them if not

FSA director of policy Sheila Nicoll 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.”