Can simple IP really work?

Given Carol Sergeant’s formidable reputation, we can expect the review to be completed to the deadline. However, to a certain extent the question misses the point.

The simple products review has the potential to be a significant landmark moment for both the IP category and the broader financial services market. Missing an arbitrary deadline would not change that. That is the big picture that we must keep in mind.

Ultimately, it will be the consumer response to the suite of new simple products which proves to be the acid test of the success of the Sergeant Review. In the case of IP, because there is a significant knowledge barrier to overcome, it is vital the product is well conceived from the outset.

In the long run there is no doubt that it will be infinitely preferable to miss the February deadline, but come out with the right product, than to bow to short-term industry pressure and not end up with the right product structure.

How will the Sergeant Review affect the reputation of the IP category?

One effect of the recession is that consumers are increasingly concerned about their finances – Unum/Populus research shows that 77% feel less financially secure as a result of the downturn.

Clearly then there is a market for protection policies to help people feel more financially secure. However, Unum research also shows that the insurance industry is ranked second only to banking as the worst offender for making product information complicated and difficult to understand.

In that context, the Sergeant review’s stated aim of helping consumers navigate a confusing financial services market becomes very important. By providing a concerted impetus to address poor consumer perceptions of the industry, the review can help IP providers to capture latent market demand, re-engaging people with the industry and helping to grow the entire sector.

In addition, valuable as simple IP will be, it is worth remembering that the full range of protection requirements cannot be covered by the accredited simple products alone.

If successful, simple IP should become a yardstick against which more specialised bespoke advice can be compared, allowing professional advisers to demonstrate the value they add beyond needs catered for by entry-level products.

A new simple IP product should therefore prove to be in the best interests of consumers, employers, providers and advisers alike. The publication of the final report in February has the potential to be a landmark moment for the industry.

But when Carol Sergeant has completed her brief, the real work is just beginning. As an industry we will need to capitalise on the report to ensure the potential of simple products is fully realised.  

John Letizia is head of public affairs and CSR at Unum