Banks and building societies will have to check whether customers are eligible for the insurance that they sell as part of packaged current accounts under new rules from the financial watchdog.
The new step is a bid to avoid the type of scandal that arose when PPI was miss-sold. The FSA are behind the new rulings and say that customers should also be provided with yearly eligibility statements telling them how to claim on the insurance policy.
The new packaged accounts are basically the same as a current account but have a range of features including insurance policies, overdraft facilities and even music downloads. Depending on the account, monthly fees range from £8 to £25. 20% of the UK adult population has an account like this, with banks encouraging these rather than the fee-free current account.
It has been revealed that Lloyds TSB is the bank having the most of these accounts. Their Silver account costs £9.95 per month and includes AA Breakdown cover, European travel insurance, mobile phone insurance and card protection.
If you opt for the £25 per month account, you can expect a fee-free overdraft of £500, comprehensive AA breakdown cover, home emergency cover, international mobile phone insurance and worldwide travel insurance.
Recently launching their first current account, Marks & Spencer have come up with a £20 per month packaged deal which comes with worldwide travel insurance. Recent FOS figures show that one of the most complained-about financial products in 2011 was current accounts.