The Financial Conduct Authority (FCA) has published their 2011 Retail Conduct Risk Outlook. The report hi-lights concerns for 2011 and one concern is the rise in packaged bank accounts being sold. Packaged accounts are fee-bearing current accounts bundled with a number of other products, such as travel insurance and other consumer benefits, and are usually designed to target as broad a range of consumer as possible. The FCA estimate that approximately a quarter of all current account customers have been sold a packaged account, and they are concerned whether the products offered the consumer value for money.
Insurancewith has long been concerned about the level of travel insurance cover in packaged bank accounts for people with medical conditions. Travel Insurance for pre existing medical conditions can be complex and relying on a travel policy as part of your bank account to fully cover your condition can be a false economy. The customer must fully read the documentation provided by the bank with the packaged account to ensure that any insurance they will be relying on actually suits their needs. Because the customer does not ask for all the benefits the packaged account offers they don’t always check it to see if it is suitable for them, and only realise that it does not fit their needs when they come to rely on it.
Advising someone on travel insurance for existing medical conditions can require a specialist understanding, particularly for cancer travel insurance, therefore is it always advisable to seek out a specialist in pre existing medical condition travel insurance if you have a medical condition.
The FCA said it had noted that consumers could be better off purchasing products individually and that the level of cover from the bundled insurance was often lower than was expected, stating ‘Consumer research suggests that these products have some positive aspects, e.g. for the convenience they offer to some consumers. However, consumers should consider whether they represent value for money for them. It is important that firms are clear about how our standards apply to packaged accounts. We will be conducting further work in this area during 2011.’
Banks have heavily marketed packaged accounts in order to increase fee income from current accounts after profits from traditional bank activities like lending were hard hit by the financial crisis.
The FCA also voiced concerns about banks bundling deposit accounts with investment products which it warned could lead to poor outcomes for consumers because of the complexity of the products and higher switching costs.
‘We believe a desirable outcome would be one where firms do not bundle products with disparate appropriate target markets or product risk profiles. It is crucial that where the bundled investment product poses an increased risk of mis-selling, firms put in place strong point-of-sale and other controls that ensure that consumers purchase products that meet their needs,’ stated the FCA.
Packaged accounts are fee-bearing current accounts bundled with a number of other products, such as travel insurance and other customer benefits, and are usually designed to target as broad a range of consumers as possible. The volume of packaged current accounts has grown sharply in recent years and these have been sold across all age groups, income brackets and socio-economic groups (Figure 75). Based on figures provided by some banks, we estimate that approximately a quarter of all current account customers had a packaged account at the end of 2009.