With the launch of the simple products steering group, what should be the focus for its protection element? Is there a hesitation about actually designing products that are simple?
Regulation that requires this level of information to be provided for a simple contract at best creates an air of suspicion towards the industry and, at worst, encourages disengagement. It is totally inappropriate for the level of risk and counter-productive to the intention of the regulator to inform.
We can certainly simplify some other protection products to make them more appropriate for sectors of the population not well-served by our industry. But we also have to remove barriers that encourage distrust and lack of understanding to have a good chance of real success.
Ian Smart, Bright Grey
The simple products working group is up and running. Carol Sergeant, the chair of the group, has already stated that designing the protection market’s offering will be ‘quite challenging’.
So where should the focus of the group be? Some would argue that protection products are already simple and to an extent, I would agree. But when you look at the range of products that are available, this is where confusion can quickly manifest itself to the uninitiated.
Life cover is the simplest of all. But there are still some choices to make around whether you want whole of life or term assurance, a level, increasing or decreasing amount of cover, joint life or single life – the implications of which need to be understood before an appropriate product can be bought.
Suddenly, it doesn’t seem quite so simple and certainly not so when you consider that life cover should be much less of a priority than others such as income protection.
The basic problem is that there is a lack of understanding among consumers of both the existence and benefits of each of these options. Taking away options to make things ‘simpler’ won’t help people get the right product for their circumstances.
The answer to the question, therefore, is that the focus should be on finding a way to communicate as simply as possible the different options available. Only then will someone looking to purchase protection for the first time be able to make a sensible decision on what to buy.
Chris Hulme, Clayton Hulme Partnership
Too often design takes form over function. Relating this to financial products, we mean the parameters of the product bring cost to be the key ‘form and design’ criteria, with the ‘function and performance’ of the product coming in far too low down the list.
Finances are often individualistic, where ‘one size fits all’ simply does not work. Take Stakeholder, for one. Its basic design attributes and price cap fell way short of addressing the needs for investment and more importantly fund performance. It was cheap (met the design criteria), but didn’t ‘function’.
CAT standards applicable to ISAs and mortgages suffered a similar fate. No wonder there is question and hesitation, and with good reason. We rarely buy the cheapest option and if we do, we don’t expect much of it. After all, who’s going to buy the cheapest parachute in the shop?
Life cover is as straightforward as it can be. No insurer in the world can argue if you’re dead or not. Critical illness cover is complex and far beyond simplification.
For income protection, the basic accident, sickness and unemployment-style solutions require no further simplification, and there are alternatives in between such as Friends Life’s two-year benefit period.
Focus and design needs to be about function. If the cheap parachute does not open when you pull the rip-cord, you don’t get a second chance. It’s the same with protection.
