New rulings cover packaged accounts
Banks and building societies must provide customers with packaged accounts with yearly statements to make it easier for them to check how suitable the products are for them, under new rules announced by the City regulator.
Packaged accounts are current accounts bundled up with insurance policies and other features such as business class lounge access at airports - but concerns have been raised that consumers are throwing money down the drain for add-ons which turn out to be useless to them.
Such accounts are held by a fifth of adults in the UK and they can cost around £20 a month.
The Financial Services Authority (FSA) previously published new rules in July this year which will force providers to check whether customers are eligible to claim on insurance cover before selling them a packaged account.
Some extra rules were made policy on Friday, following a consultation. They also state that the annual eligibility statement must be sent separately from other documents to give it greater prominence.
Firms will also be required to include an alert for customers who have reached the age limit for the travel insurance or who will reach the age limit before the next eligibility statement is due. The FSA wants to ensure customers are given the same level of protection they would have had if they had bought the products separately.
A "key risk" it found in its previous research is that consumers may believe they are covered by each policy included in their account and only discover they are ineligible when it is too late. 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.
The FSA's rules will force financial institutions to check whether a customer is eligible to claim under each policy, share this information with the customer and alert them to policies where they are not covered.
The Financial Ombudsman Service said it receives around 30 complaints a week about packaged accounts and around three-quarters are about the sale of the policy. The service said a "significant" number of complaints relate to people making a claim for insurance covering mobile phones or travel, for example, only to find the insurance policy is more restricted than they had assumed.