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&#39Sandler puts firms between a rock and a hard place&#39

The 1 per cent world of stakeholder-style products proposed by Sandler will leave providers between a rock and a hard place, warns Norwich Union.

The country&#39s biggest life company says economics dictates a sliding scale of charges as writing low-premium business is more expensive but to call for higher charges for poorer consumers would court negative publicity.

If the products are aimed only at lower-premium business, there would also be no cross-subsidy, which could make providers shy away from offering the products, says NU.

While saying it proposed safe-haven products to Sandler, NU is concerned the simplified product suite could raise the prospect of RU64-style rules with IFAs forced to sell products that do not have distribution costs built into them.

Norwich Union director of marketing Robert Fletcher says: “The &#39stakeholder&#39 suite has to enable providers to get a return on capital, distribution to be remunerated and a good deal for consumers. One per cent of low premiums is less than on higher premiums because of the fixed costs involved. The industry needs to ask if it is feasible. We are caught between a rock and a hard place.”

Consumers&#39 Association senior policy adviser Mick McAteer says: “Any price cap should apply across the board but we are not surprised to see a counter-attack by the industry. We hope that the 1 per cent cap will force consolidation and then the economics will change.”

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