Barclays's new life insurance heralds a revolution on the high street
The new product marks a shift towards 'clear, straightforward and standardised' banking products, says Simon Read
Simon Read is Personal Finance Editor at The Independent. He edits the Saturday Your Money section and writes the Daily Money column and Wednesday’s Midweek Money section in i newspaper. He also writes for the news and business pages of the Independent and i newspaper and is a regular money commentator on TV station London Live. He has won numerous awards including Consumer Finance Journalist of the Year.
Friday 01 August 2014
A revolution in simple savings and insurance products begins today. A year after a government review demanded that banks scrapped confusing gimmicks and tricks, the first new product to pass a stringent simplicity test is being launched.
Barclays is first out of the blocks with a BSI-approved life insurance policy, but the author of the review said she expects rival high street institutions to introduce their own simple products soon.
The Sergeant Review called for the development of a range of simple savings accounts and life cover. Products must be "clear, straightforward and standardised" to be awarded a BSI Kitemark which, it is hoped, will send out a reassuring message to consumers.
"All high street financial product providers should offer their customers a range of simple products," Carol Sergeant told The Independent.
"People don't like complicated products that are hard to understand –they don't trust them . The products should be easy to understand, easy to buy, easy to compare and easy to manage.
"The BSI certification process will ensure that they do what they say on the tin and the BSI Kitemark will be available to any financial services company that meets the standards."
The Treasury set up the review in 2012 because of concerns that many people were doing little, if anything, to protect themselves financially.
"The statistics are overwhelming about how many people are underprovided when it comes to rainy day savings and protection to get them through the ups and downs of life," said Ms Sergeant.
"Isn't it terrible, for instance, that people end up going to payday lenders? If they had some rainy day savings they wouldn't need to do that."
She pointed out that one of the key issues is that people are bewildered by the range of savings products and different prices on offer.
That view is backed up by damning research published today by the consumer group Which? Its report reveals systemic failings and poor practices in the savings market that distort competition and make it difficult for people to know whether they are getting a good return on their savings.
It found a wide range of problems including confusing account names; "zombie" accounts (ones that initially paid good interest but now pay almost nothing); rollover and auto-renewal practices; poor customer notification; and difficulties switching to another provider.
Which? is calling for the Financial Conduct Authority to use its competition powers to scrap some of these practices and revolutionise the savings market. BSI-approved accounts will achieve that aim. For instance, misleading teaser rates are banned from the range of simple savings products.
"Savings accounts that are easy to understand and easy to manage would be much more popular so financial institutions need to start to think differently," Ms Sergeant said.
"They should be asking themselves why millions of people are not buying these essential products and think about what they can do to make them more accessible and more trusted."
Launching Barclays' new BSI-approved, fixed-term life insurance policy, Catherine McGrath of Barclays Personal Banking said: "We see this as an important step forward for the industry. We are determined to drive simplicity across our product range."
Others are rumoured to be close to launching similar simplified products. "We needed a first mover and I didn't mind who it was," said Ms Sergeant. "Now the challenge is there for others to follow."
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