Credit card insurance perks ending

An increase in regulation has meant that fewer credit card companies are offering insurance perks, a new report has said.

17:58 25 January 2005

An increase in regulation has meant that fewer credit card companies are offering insurance perks, a new report has said.

Earlier this month regulation for general insurance moved from the General Insurance Standards Council to the Financial Services Authority.

Today moneysupermarket.com revealed that the cost of this regulatory change has meant many leading credit card providers have withdrawn insurance perks such as purchase protection and travel accident cover.

The price comparison website lists Halifax, Sainsbury's Bank, Lloyds TSB and HSBC as withdrawing purchase protection cover while Barclaycard has also dropped all other insurance benefits.

Barclaycard has, however, replaced these with perks including identity protection service and a home emergency helpline.

"The withdrawal of these fringe benefits by some of the leading card providers is a disappointment and evidence of well-intentioned regulation having an adverse impact on consumer choice," said Stuart Glendinning, director of credit cards at moneysupermarket.com.

"For the 77 per cent of consumers who pay off their balance in full each month, the added free perks that credit cards offer can prove very attractive.

"I believe the withdrawal of free insurance perks on credit cards, as well as other types of financial products, such as current accounts, is likely to be a growing trend here-on-in, with many other providers following suit."

However, a spokesman from the Financial Services Authority told MyFinances.co.uk: "The decision on whether to provide insurance is up to the companies involved.

"But we do not think the requirements [of the new regulations] on the companies are particularly onerous."

Under the new regulations all insurance brokers and intermediaries will need to meet industry standards of professionalism and competence, while consumers gain access to the Financial Ombudsman Service (FOS) and the Financial Services Compensation Scheme (FSCS).

Insurers will also have to provide a policy summary, or key facts illustration, on their documents - allowing consumers to more easily compare different policies.

Credit card companies rejected claims that the withdrawal of free policies would be a problem for customers.

Halifax told MyFinances.co.uk that the regulation changes did not prompt the withdrawal of things like its free travel accident cover.

However, the cost of providing an advice service for these policies, required by the new regime, did lead to their withdrawal.

But the company added that it was very unlikely that these changes would affect customers, as they were "pretty much unused".

"Over the last five years the number of claims on these [insurance] policies can be counted on your fingers," a spokesperson told MyFinaces.co.uk.

Barclaycard added that its changes, while prompted by the insurance regulation changes, were designed to benefit its customers and not to save money.

The card provider told MyFinances.co.uk that it undertook customer research before altering the policies it offered.

Peter Crook, Barclaycard UK managing director, said of the changes: "We want to offer services which appeal to as many of our cardholders as possible and more importantly, which provide them with the right support and protection when it's needed the most."