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Under cover

Apathy and lack of knowledge makes the public buy poor products

It’s funny how history repeats itself and yet people never seem to learn from their mistakes and so it is again that I write about my old friends at Axa Sun Life and the latest offering from their “direct sales” department.

I am not sure why I waste so much of my time because I have far too much to do already without acting like some kind of amateur sleuth.

I was under the dizzy impression that this is someone else’s job but I am clearly mistaken. But with my need to vent bile, tar other people with a mucky brush and raise awareness of the sort of sub-standard products other people seem to miss, how’s this one for size?

Axa have just sent me an invite to sign up to their EasyCover plan. You know the sort of thing. Choose a life cover benefit up to a low maximum, make sure the person is basically fit and healthy and give them some cover over the phone. Easy, I suppose, but we can all do that for much, much less.

Fair enough, they have chucked in a couple of unlikely freebies but basically it is low-end insurance for the masses. So knowing what Axa are like, I asked a willing volunteer to get me an Exchange quote for as close to the same cover as we could. And guess what, it was a little less than half the price.

Let me get this right. Pay over twice as much, get no advice and therefore no consumer protection and deal with a faceless call centre. How is it that anyone buys this stuff? It has to be apathy and lack of knowledge, does it not? Five minutes on the internet would yield better results, 10 minutes with an IFA even better. Axa have such a streamlined product that it could be as cheap as chips but they “market” this instead.

This brings me on to a rather nice philosophical point. Why is it that we knowingly let some businesses sell products that are clearly extremely poor value for money? Obviously, market forces and consumer choice are paramount but at what point do we draw the line and stop something being marketed?

One might argue that a lot of what we do is subjective but how subjective do you need to be to recognise something as rubbish? Of course, there are certain classes of business that are not really subjective at all. Take annuities, for example.

Tom McPhail in the September 6 edition of Money Marketing suggests that vesting plans should not publish an annuity rate. He proposes that it should just be an open market option figure and that this would force the customer to start shopping. One of the options could be a tickbox for a contact generated through Unbiased or their current IFA who is noted on the options page.

It is not good enough to let people default either to the incumbent office or some canny link between annuity no-hopers and “proper” offices such as Legal & General and Prudential. These firms are normally towards the top of annuity tables but not always at the top. This is a tacit admission of mediocrity by all concerned, particularly the FSA which presumably has agreed to this kind of practice.

It might be better than the previous situation so good on the likes of Skandia for at least trying to improve a shabby situation.

I suppose I might just give the likes of St James’s Place a raised eyebrow of approval but not really. This is a further fudge from a company which likes to think it is independent but isn’t really. I hear a lot of good things about this firm but this is one area that is still pretty “cheap”. Of course, the reality for both offices is that they still get commission for introducing the business, often at inflated rates compared with the likes of us at Thameside.

Perhaps Money Marketing should run a competition to find out the best way of opening up the Omo. First prize could be a lifetime supply of annuity referrals from Unbiased and then we could think about the next area of business to have a go at. Maybe term insurance is due a bit of a drubbing?

Tom Kean is director of Thameside


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