Andrew leads our Operational Team and is our expert when it comes to all the ins and outs of car hire excess insurance.
Lloyds TSB have placed a temporary ban on the sale of their packaged accounts from 1st January. The accounts will not be sold through branches on by phone yet will still be available online.
The FSA released its policy statement (PS12/22) about the sale of insurance products as part of a packaged bank account last Friday. The FSA have been particularly concerned about customers being mis-sold insurance that customers would not be eligible for or that weren't suitable for their needs. The FSA announced changes that require banks to ensure that the packaged accounts have been sold appropriately. One of the checks will include sending annual eligibility statements to customers setting out the qualifying criteria to enable them to claim the benefits of the accounts.
A spokesperson for Lloyds TSB denied that the ban was because of concerns of mis-selling saying it was to "harmonise the way these accounts are sold between Halifax and Lloyds TSB branches”. Currently Lloyds staff will recommend one of their packaged accounts to prospective customers, Halifax staff do not make recommendations, simply provide information to allow the customer to make their own choice. By making customers apply though the internet only, Lloyds TSB are adopting the lower risk "non-advised information only” route.
It is estimated that around 33% of Lloyds TSB customers are paying for a packaged account. This is much higher than the 16% average across all UK banks so they are a very big player in the packaged account market. Mistakes that lead to mis-selling compensation claims would therefore be very expensive for Lloyds TSB.
One of the other changes being implemented by the FSA is to switch off one of the Insurance Conduct of Business Sourcebook (ICOBS) rules. The rule required the banks to disclose the price of the linked insurance policy separately from any other prices and whether buying the policy is compulsory. The FSA are dropping this because as the insurance was part of a fixed bundle of benefits, they did not think the rule was achieving its aim.
If you are tempted to take up a packaged bank account, make sure you consider the benefits carefully.
For example: Lloyds Silver account includes European Travel Insurance for two adults. It also includes a single personal AA membership. So are there two of you with one car?
The European Travel insurance doesn't include Winter Sports cover or Pre-existing medical conditions. It says you can upgrade these for an extra fee. Lloyds say this policy is worth up to £113.
Well it is a good policy but a quick quote using the MoneyMaxim cheap travel insurance comparison found among many others, the American Express Annual Select policy costing £50.92. Actually make that £48.37 with an EHIC card. That's for a 5 star defaqto rated policy allowing up to 45 days per trip rather than 22 days for the Lloyds/AXA policy. That quote was based on two thirty year olds. Rerunning the quote for a sixty four year old couple increases the price to £116, though there were policies available from under £35. So the bank's policy could be worthwhile if you are in your sixties – but it does stop when you hit your 65th birthday, even if that is part way through the year.
Shopping around gives you the ability to choose the features you want from a travel insurance policy. If you want travel insurance to cover pre-existing medical conditions, premiums can rise quickly. With the packaged account you are tied in to one supplier, again, it pays to be able to shop around and use insurers who want your business.
The AA Breakdown cover at £61 could be replaced by Green Assist Roadside at under £18 through MoneyMaxim breakdown comparison service. You could upgrade to include home start, UK wide recovery, car hire and/or alternative travel by taxi or train with overnight hotel accommodation for under £30.
The Lloyds TSB phone insurance policy is fine though uses the underwriters trick of giving you a high value limit when there's no chance of a claim reaching those amounts. There aren't many phones that retail for £2000 – the top of the range iPhone5 retails for £699 and the base model is £529. The policy will cover two phones if you have a joint account. iPhones attract a heavy £100 excess, other phones £50. Lloyds value this policy at £92.
Using the MoneyMaxim compare mobile phone insurance site you can cover up to 5 phones (and other gadgets) with a combined value of £1000 for £69.99 with a £50 excess.
Packaged accounts often include both improved overdraft facilities and savings options. If you're going to make much use of one you probably won't be getting the benefit from the other. For instance, if you're constantly going slightly overdrawn each month, you could probably find a better place for the £250 per month regular savings. Like in the current account to stop it going overdrawn! Or more likely, the regular savings account is a carrot that you can't reach. Not that this matters with the Lloyds packaged accounts, as there aren't any savings schemes exclusively available to the packaged account. If your finances are marginal, you may find that £9.95 is better kept in the account than handed over for insurances you can buy cheaper elsewhere.