'Packaged account' rules proposed

The Financial Services Authority (FSA) proposed new rules today to stop banks and building societies selling customers insurance cover along with a bank account that turns out to be "useless".

The proposals relate to the selling of "packaged accounts" - current accounts which are bundled up to include extras like insurance policies and products such as ticket discounts.



The FSA, which regulates the financial services industry, said it was concerned that it was "too easy" for customers to be sold something which they do not need.



It estimates that a fifth of adults in the UK hold such an account - and while some customers get value from the package, others may not.



Sheila Nicoll, FSA director of policy 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."



The FSA's consultation document proposes that banks and building societies selling insurance as part of a packaged account will have to check whether the customer is eligible to claim under each policy and share that information with them.



They should also 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.



The FSA's proposals also said that 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.



The body 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, making it hard for customers to compare costs with standalone insurance products or other bank accounts.



A statement from the British Bankers' Association said: "Packaged accounts can be a good deal for many customers as the services which you get would cost more bought individually.



"However, as with any product, customers should shop around for the deal which suits their own needs best.



"All account details are openly available on bank websites or on request.



"Customers should also remember that no one needs to pay for a current account and there is no need to switch if you are happy with the account you have.



"Our members will now be considering the consultation paper carefully and will respond fully in due course."



Financial research company Defaqto said the number of packaged current accounts available to consumers has increased by 109% since 2006.



Defaqto found that five years ago there were 33 packaged current accounts on the market - a figure which now stands at 69 - and since November 2009 there have been more packaged accounts available than free in-credit accounts.



The average monthly fee for a packaged account has increased over the same period - from £11.59 in 2006 to £15.44 currently, with monthly fees now ranging from £6.50 to £40.



David Black, Defaqto's insight analyst for banking, said: "If someone is considering opening a packaged current account, they should look at each of the incentives on offer and decide whether they need the benefit and, if so, whether what it provides is suitable for their circumstances - and ultimately represents good value against the monthly fee.



"The three high-value incentives currently offered by most packaged current accounts are travel insurance, motor breakdown cover and mobile phone insurance.



"For each benefit, it is important for people to look at the type and level of cover that is actually being offered and to compare these against other accounts and also standalone alternatives.



"In addition, people need to be mindful of duplicating cover they may already have in place, for example as part of workplace benefits.



"Essentially, everyone's needs are different so people should look to ensure that any account they choose matches those needs - and key to this is looking at the features of the account and comparing different options on this basis."









The Financial Ombudsman Service said it receives around 100 to 150 complaints about packaged accounts each year.



Typical complaints include people not realising they had a packaged account, not fully understanding how much the account would cost, and problems with the additional extras not being applicable or useful for the consumer's needs.



A spokesman for the ombudsman said: "In addition, we also see complaints about the specific product attached to the bank account, such as breakdown assistance, mobile phone and travel insurance.



"These complaints often arise when the consumer attempts to use the products, only to find that they aren't covered or have more limited cover than they realised."



Which? executive director Richard Lloyd said: "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 £240 million and £320 million 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."









Mike Regnier, director of current accounts for Lloyds Banking Group, said: "We welcome the publication today of the FSA consultation paper on packaged accounts.



"In particular, we are pleased that they have recognised that these accounts can provide good value to customers.



"Our packaged accounts are designed to be simple whilst offering comprehensive levels of cover for the things that customers really need, and compare favourably to other stand-alone policies. Furthermore, our sales process is designed to identify and match customer needs.



"The FSA has put forward sensible suggestions into ways into which this market can further be improved.



"Along this line, our existing policies and sales processes already deliver many of the recommendations put forward in today's consultation paper."

PA

Suggested Topics
Sport
world cup 2014A history of the third-place play-offs
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
PROMOTED VIDEO
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Arts and Entertainment
'Eminem's recovery from substance abuse has made him a more potent performer, with physical charisma and energy he never had before'
Review: Wembley Stadium ***
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Sport
Yaya Touré has defended his posturing over his future at Manchester City
News
Detail of the dress made entirely of loom bands
news
Life and Style
beauty
Sport
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

    A History of the First World War in 100 Moments

    Peace without magnanimity - the summit in a railway siding that ended the fighting
    Scottish independence: How the Commonwealth Games could swing the vote

    Scottish independence: How the Commonwealth Games could swing the vote

    In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
    Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

    A writer spends a night on the streets

    Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
    Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

    UK's railways are entering a new golden age

    New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
    Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

    Conchita becomes a 'bride' on Paris catwalk

    Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
    Pétanque World Championship in Marseilles hit by

    Pétanque 'world cup' hit by death threats

    This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
    Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

    Why did we stop eating whelks?

    Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
    10 best women's sunglasses

    In the shade: 10 best women's sunglasses

    From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
    Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

    World Cup final: Messi? Mascherano is key for Argentina...

    No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
    Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

    Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

    18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice