As an ‘old school’ adviser I frequently chuckle to myself when I read about consumer access initiatives that the theorisers have developed after nineteen sub-committee meetings and the usual plethora of memo’s and sham consultations.
Each year’s new ‘big idea’ is a source of great mirth – although the advent of the MAS has degenerated from a regulator’s educational project into a sad joke, with the biggest laugh being on the industry which is forced to fund it.
However there are some proposals that fail to elicit a chuckle, in fact they provoke a sub-woofian growl and one of these is the simple products initiative, whose steering group was chaired by Carol Sergeant CBE.
This group is currently struggling with the design of simple protection products.
Now I am all for simplicity and there are numerous areas where complex product designs, reinforced by regulatory and other bureaucratic imperatives, serve to introduce layers of unnecessary hokum. Yet to these eyes protection does not seem overly high on the confusion ladder.
The group has, for the time being, given up on income protection and is focusing on the complexities of term assurance. One might reasonably believe that term life could not be simpler – you buy, we pay if you die.
It seems that a shuffle of bureaucrats (which is the collective noun) has decided that terminal illness, waiver of premium and guaranteed insurability options are terrifyingly confusing and to bolster the take up of such plans these mystifying features must be removed.
What exactly is the point? The view being espoused is that insurers will offer ‘simple’ products online and that confused consumers will clamour to buy these. Such thinking spawned the disaster that was stakeholder pensions which proved one of the largest nails in the saving for retirement coffin.
What evidence exists demonstrating that consumers do not buy life assurance due to perplexity? It defies all logic to imagine that this caucus of confused consumers has not approached an adviser/a bank/an online bucket shop to resolve this confusion. More likely any confusion rests with the theorisers.
Presumably these and other ‘simple’ plans will be marketed alongside the traditional confusing plans which to me seem, eh, confusing.
Will advisers sell such products if made available? Well the design is likely to reduce the product cost by 0.5 per cent or so but then again cost has never been the issue.
Imagine the shock horror headlines when a previously confused consumer develops a terminal illness and his ‘simple’ plan results in a declinature because it does not include it.
In short, simple is synonymous with inferior and I question why we believe that reducing the quality of a protection plan is seen as a way forward.
This seems a depressing waste of resource at a time when so much more could be achieved.
Perhaps some sub-committee of professional shirkers and eternal students can come up with a design for simple regulation. Now that sounds like a plan.
Alan Lakey is partner at Highclere Financial Services