Banks have been warned they may need to review the way they offer insurance policies such as travel cover to customers.
Many banks include the policies, which can also involve mobile phone insurance and breakdown cover, as part of premium bank accounts where customers pay a monthly fee. The Financial Services Authority says around 20 percent of adults has opted for such a bank account.
The problem is that some customers may not be eligible for the cover that is bundled with their account. For example, travel policies may be invalid if the customer has a pre-existing medical condition, or is simply over an age limit. Mobile phone policies may only be valid if the customer specifically registers their handset and may only offer limited protection that duplicates what's available under the customer's own home contents policy.
The FSA has now changed the rules meaning that from March next year, banks must specifically check that a customer is eligible to claim under a policy before signing them up to the relevant premium account. They must then send an annual statement detailing the eligibility requirements so that the customer can check the cover is still valid.