Since the publication of the Sergeant Review of simple financial products I have followed the observations in the trade media with interest. Having been very much on the inside of the initiative (chairing the working group on protection and attending the steering group meetings) it is interesting to contrast the hard work and good intent of those involved with some of the commentary by those who weren’t.
One of the more imaginative descriptions of the initiative has been to label simple products as ‘McProducts’. My guess is that the reference was intended to suggest such products may be quick and easy but probably not good for you. I think the reference is a little off target. In fact, I would suggest that Mac is probably more accurate than Mc. Simple insurance products are not designed to last a few minutes. They are built to be fast, reliable and to last. They are designed to be bought without advice (which is a good thing for advisers as we’ll come to later). They therefore have to be ergonomic(designed to minimise physical effort and discomfort, and hence maximise efficiency) and with an intuitive interface because they are intended for use without manuals or human instruction.
Whether you think Mac or Mc, advisers should not fear simple products – they should embrace the concept. Of course good advice is the gold standard but we can’t deny people access to cover just because they are denied access to advice. There are significant segments of the population which advisers do not or cannot reach, probably because there simply aren’t enough advisers to go around. We therefore have a responsibility as an industry to construct solutions for the currently un-serviced segments.
Some advisers, in the right circumstances, may recommend simple products to their clients. However they will still also have the existing comprehensive products with various options and add-ons which they sell now. The advent and specification of simple products will actually help advisers differentiate both themselves and the advice they give in a way that isn’t as obvious or as easy today.
Simple products by themselves won’t change much – but you have to start somewhere. The other parts of the improved engagement jigsaw also have to be delivered including – increased consumer awareness through improved visibility (activity and marks) and the use of social norms to appeal to human heuristics. All would be delivered by trusted messengers including – but not limited to – what I will call new-MAS.
If and when the pieces can be clipped together, everyone will benefit. The state and customers will gain because of improved individual resilience in the face of adversity. Providers will be better off because they will have new customers and advisers as a result of an improved general level of consumer awareness, many of whom with their raised awareness will be likely to follow the signposts to advice.
The simple products initiative as it relates to protection was not led by “theorising bureaucrats” as the referenced author suggests, rather by experienced distributors and providers – all successful, active market participants. Maybe I ask too much but I think as an industry we would make more progress if some curtailed their instinct towards sniping and NIMBYism and worked constructively to ensure the advice and non-advice regimes compliment rather than compete head on with each other.
Finally, I guess you can accept change, embrace it, challenge it as a part of it and try to make the outcome as good as possible under the circumstances. Or you can take the easier roles of ostrich or critic. It is for each of us to decide what our contribution is going to be – something or nothing.
Richard Verdin is UK protection director at Aviva