Only churn if it means better value

You report some of my comments from the Labour Party Conference following Sir Callum McCarthy’s recent speech but the headline suggesting that I favour churn is misleading.

If customers are advised to shift between long-term investment products of equal suitability purely to gain commission, then there is clearly no gain to individual customers or to the reputation and financial health of the savings market itself. So we agree with Sir Callum’s warning about this kind of unproductive churn.

But it is clearly right for consumers to be advised to switch providers if they can get better value, better service or a wider range of investment options elsewhere. Switching can serve consumers extremely well and my point at the conference was that consumer groups and regulators often take it as a sign of a healthy market in other areas, for instance, in telecommunications or the energy utilities. Switching drives cost reduction and product innovation. That is why the ABI is arguing for some choice in personal accounts.

Competition and choice are good both for consumers and the industry – commission-driven churn is not. We should not sacrifice one in our determination to combat the other.

Stephen Haddrill, director general, Association of British insurers