Advisers disagree that Barclays new “simplified” product is good value for money and Sergeant Review “waste of time“
The Financial Services industry today announces its first “simple product” in accordance with the recommendations of the Sergeant Review for Simple Products (March 2013). It is supported by an independent certification process run by BSI (British Standards Institution).
The Sergeant Review concluded that lack of transparency, complexities in product design and the inability to make straightforward comparisons in a complicated marketplace undermined consumer confidence and trust, with the result that too many people are saving too little and do not have enough protection. The Sergeant Review recommended a suite of simple and transparent savings and protection products that “do what they say on the tin”.
A set of nine principles guide the development and sale of these products including their features, language and purchasing process. Providers will have their products rigorously and independently assessed against the nine principles. Each product will then be subject to on-going audits against the same principles, in addition to post purchase surveys. If compliance with these principles is not maintained, the certification will be withdrawn. The BSI certification process is open to any provider to use, subject to meeting the required criteria.
The first product to be certified by BSI to the Sergeant Review principles will be a Fixed Term Life Insurance product from Barclays, underwritten by Aviva.
Carol Sergeant, Chair, Simple Products Steering Group, said: “Navigating the financial marketplace and making good choices with confidence remains a challenge. Just a year on from the conclusions of our review I’m delighted to see the first simple financial product independently certified and our recommendations become a reality. And there are several more Simple Financial Products in the pipeline. These products will be easy to understand, easy to buy and easy to manage. The BSI certification process will ensure that the products do what they say on the tin and the BSI Kitemark will be available to any financial services company that meets the standards. All mainstream providers of financial services should offer their customers the opportunity to buy independently certified simple financial products, and I look forward to more firms introducing these products.”
Howard Kerr, Chief Executive of BSI, said: “Last year’s Sergeant Review highlighted the need for transparent, easy to understand savings and protection products that the public can trust to meet their essential needs. The new BSI certification process – BSI Kitemark – gives consumers the confidence to make an informed and straightforward purchasing decision. The BSI name and BSI Kitemark is recognized as a symbol of trust and we have a growing track record in promoting excellence across the services and financial sectors.”
Catherine McGrath, Managing Director, Barclays Personal Banking, said: “We know that customers want their bank to be upfront, clear and transparent. We are pleased to be able to offer the first certified product and see this as an important step forward for the industry. We are determined to drive simplicity across our product range.”
- Essential product features that are simply explained, useful for the consumer and meet the needs of the target market.
- Clear, straightforward and standardised language and presentation so that all firms are using the same language and presentation for product information to enable consumers to understand and compare products.
- Standardised product names that clearly identify the nature of the product.
- Conditions, options and exclusions are limited to what is appropriate, reasonable and necessary for the product, and are simply explained.
- A straightforward and clear purchasing process for the consumer.
- A clear pricing and return structure which is easily understood by the consumer and allows products to be compared with one another. This would include standard methods to calculate prices, interest, charges and appropriate notice for fair and reasonable changes in price, term or conditions.
- Ancillary fees and charges for exceptional items are transparent, reasonable and predictable.
- Clear methods of informing the consumer about the current prices and returns and any changes, as well as appropriately regular updates on the status and benefits of their product.
- If a product loses its accreditation/certification the consumer should be told and there should be no penalty or charge for the consumer to exit the product.
Details of the Barclays Fixed Term Life Insurance product:
- Pay out a pre-agreed lump sum in the event of death
- Premiums are set at outset and are guaranteed for the life of the policy
- Cover available for a specified term in years
- Policy will only cover one person
- Only general exclusion is for suicide within the first twelve months of the policy
- Terms and conditions for this product would be uniform across providers
- Product will be able to be safely sold on a non-advised basis
This all sounds like good news for consumers until you start looking at specialist trade press articles where you will find advisers have crticised Barclay’s new ‘simplified’ fixed-term life insurance product. Advisers have been critical, highlighting key shortcomings compared to other basic products.
Advisers have warned Barclays new product might be the first recognised ‘simplified’ product but there are several areas where the product lags behind traditional life cover. Industry expert, Alan Lakey of CIExpert.co.uk and Highclere Financial Services – a man known for speaking his mind – told the FTAdviser.com: “the Sergeant Review, has proved to be a monumental waste of time and resource, and that the simplified tag is just a marketing ploy”.
Mr Lakey continued: “My understanding is that it is an existing plan with options such as waiver of premium removed and with guaranteed insurability options and terminal illness, both of which are normally included automatically, also being removed. Any person capable of cogent thought would opt for a less simple product that contained some important bells and whistles rather then save 1 per cent on the premium and buy a second rate product.”
Maybe the advisers raising concerns about this new “simplified” product should use this to their advantage. Banks don’t sell good protection policies and tend to be tied to their own products which tend to be more expensive and of poorer quality.