This report provides the findings from our thematic review into packaged bank accounts (PBAs). The review was performed to assess how firms implemented the PBA Insurance: Conduct of Business Sourcebook rules that were introduced in March 2013. We also tested whether customers who complained about their PBAs received fair outcomes.
In 2014 we estimate there were over 9 million customers with packaged bank accounts in the UK. While this number has fallen since then, there are still a substantial number of customers in the UK with this type of account. We continue to believe there is a place in the market for packaged bank accounts as they can provide good value and convenience for customers. However, customers can find these accounts complicated to understand because they contain a bundle of insurance and non-insurance benefits. It is important that customers understand whether they are eligible to claim on the insurance policies in their account.
There is a risk that customers suffer detriment if they rely on one or more policies, only to find out later that they are ineligible to claim. We wanted to test how firms have implemented the rules we introduced in 2013, which were designed to mitigate this risk. In response to the rising number of complaints about packaged bank accounts, we also wanted to see how well firms handled complaints.
Who this applies to
The review should interest all regulated firms that provide, have provided or are considering providing packaged bank accounts. It should also interest consumers who have, previously had or are considering having a packaged bank account.
Our findings on complaint handling may also be of general interest to all regulated firms who deal with complaints. Trade bodies representing these firms and organisations that represent consumers may also wish to read this report.
Key findings
The findings of the thematic review suggest that the new rules around packaged bank accounts have raised standards in the market, but that firms have more work to do on sales and complaints handling.
The review found that eligibility checks for travel insurance had improved, but firms had more work to do to check and record eligibility for other insurances, such as gadget insurance and motor breakdown cover.
The review also assessed how firms were dealing with complaints initiated in late 2014 about packaged accounts, when complaints volumes were rising. The review suggested that too many customers who complained about being mis-sold packaged bank accounts during this period did not get the right outcome; a finding supported by the number of complaints the Financial Ombudsman Service (the Ombudsman) upheld in that period.
Next steps
We have provided firm-specific feedback to firms in our sample and set actions to address the weaknesses we have identified. We will be following up with these firms to ensure the improvements they make are effective.
Firms not included in our work should consider how our findings apply to them, taking action where needed.
We will be reviewing an additional sample of mis-sale complaints that firms received between March and May 2016 to test whether they have improved the quality of their packaged bank account complaint handling. We will not be testing additional non mis-sale complaints as, in the review sample, these were largely handled well.
We plan to hold a roundtable with firms selling packaged bank accounts to confirm our expectations in relation to how they check and record eligibility. As part of our broader work on behavioural economics, we will also consider how any behavioural research on customer communications may be relevant to the design and use of annual eligibility statements.