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A Consumer&#39s View

The one good point about the ABI&#39s Raising Standards campaign is that it does not have to rig its questionnaire to achieve a low baseline from which any improvement will be greeted with flag waving and claims that customers are getting a much better deal.

The initial findings are totally damning and speak for themselves. Nearly half the consumers questioned were not at all confident about buying products from the life industry. One in three was sceptical or lacking trust in the provider or product.

The Equitable Life debacle will have done little to reassure them.

The majority of consumers clearly find insurance documentation, marketing and promotional material incomprehensible, with 67 per cent complaining that information is never or seldom written in plain English. Some 83 per cent of respondents said they would rather buy products from a company carrying a quality mark.

Meanwhile, 71 per cent of those questioned believed they were quite well or very well provided for although 66 per cent identified a lack of funds as the reason why they did not make appropriate financial provision.

Had this question been followed up by asking the respondents to quote the current level of state retirement pension, it might have revealed why so many people who either do not want to save or cannot afford to do so believe that, despite this, they are well provided for.

Even the ABI was moved to comment: “The findings… highlight the fact that many consumers consider themselves to be well provided for financially while independent evidence suggests otherwise.

“Consumer awareness of what constitutes suitable provision, along with improved confidence in the industry, ought to help expand the long-term savings market – one of the key objectives of the Raising Standards initiative.”

Whether or not the Raising Standards initiative will be a success is decidedly dubious, given the limited support given to Catmarking both by consumers and the industry.

The omens do not augur well when we find yet another example of deliberate obfuscation. The ABI report highlights the high-profile media coverage of with-profits, in particular the issues surrounding Equitable Life and the Axa/Equity & Law orphan assets row as well as the somewhat wide of the mark Con- sumers&#39 Association report and the total whitewash from the actuarial profession.

Nobody disputes that with-profits products serve a very real and genuine need, giving investors a better return than straightforward bank or building society savings accounts without the rollercoaster ride of direct investment in shares or mutual funds.

But it is not helpful when the ABI talks about “perceived” problems with the with-profits concept.

The problems are very real and will not be solved so long as the industry pussyfoots around the issues and refuses to acknowledge the obvious shortcomings.

It is totally unacceptable that money which has come from with-profits policyholders&#39 premiums is regularly raided to pay for management, marketing and actuarial disasters bordering on gross negligence, such as the pension misselling debacle, deliberate or incompetent endowment premium miscalculations and the controversy over guaranteed annuities.

It is laughable that the ABI thinks anyone is reassured by inadequate promises such as “the yearly statements will provide customers with clear and concise information about how their investment is doing”.

Even if this were true, this begs the question of whether their investment would do much better if the management were prevented from regularly raiding the with-profits fund, as they undoubtedly will again, to pay for the promotional and start-up costs of stakeholder pensions.

Until with-profits funds are totally ringfenced – a requirement laid down correctly by the Treasury when it was deciding whether or not with-profits funds could be offered, ironically enough, as a stakeholder option – investors will continue to be quite rightly sceptical of all life company promises.

If the ABI&#39s Raising Standards campaign is to be anything more than a purely cosmetic exercise, it has to deal with this fundamental problem – fast.

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