Insurance from Your Bank Worth it? The FSA asks the big question

Consumer champions are warning about another financial misselling scandal to hit banks and building societies as new rules are announced about packaging insurance with bank accounts.

Most banks and building societies offer packaged accounts – which come with a bundle of financial services, like travel and gadget insurance, overdrafts and music downloads.

Customers are charged a fee for these add-ons – and less than a third use any of the services.

Now, the FSA wants to make sure they are no0t being ripped off by making the providers run stringent checks before selling packaged accounts from March 31, 2013.

These include:

●     Checking if the customer is eligible to claim under each policy and to share that information with the customer

●     If the sales adviser is recommending policies in the package they must establish whether each policy is suitable for the customer and alert them if some are not

●     Provide customers with an annual eligibility statement setting out the requirements to claim each of the benefits under each insurance policy in the package which should prompt customers to check whether their circumstances have changed and whether the policies continue to meet their needs

Sheila Nicoll, FSA director of policy, said: “These products are often referred to as upgraded accounts but if you end up paying for an element you can’t claim on, it’s 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’re buying and that they can rely on the product or have the limitations explained before buying.”

The FSA is also consulting on further issues including a proposal that annual eligibility statements should be sent to customers as a separate mailing to give them added prominence, and that banks and building societies should tell customers who have triggered the age limit for claiming on the travel insurance, or warn them if they will do so before the next statement is due.

The FSA is also monitoring the promotion of packaged accounts where monthly costs are advertised alongside yearly benefits.