James Daley

By James Daley

Helping consumers make better financial decisions has always been a tricky challenge for regulators and governments to master. Most people have no interest and little understanding in the complexities of banking or insurance - and so it's no surprise that so many people end up sleepwalking into insurance policies or investments which are either unsuitable or just bad value.

The government's latest policy rouse to solve this conundrum is to encourage banks and insurers to start creating suites of "simple products" - savings accounts and insurance policies that are so plain vanilla that mis-selling and even mis-buying is next to impossible.

It's not quite a new idea. In the 90s we had CAT standard products (an acronym for "charges, access and terms"), and in the noughties came stakeholder products. The principles across these schemes were broadly similar: that products should be simple enough, flexible enough, cheap enough and therefore good enough for just about anyone.

Nine simple tests

When the simple products review - led by former FSA director Carol Sergeant (pictured) - finally concluded last year, its aspirations were thankfully quite modest. It limited its scope to a suite of savings products and a simple life insurance policy, with an ambition to extend into income protection at a later date. To be classified as "simple", you needed to pass nine tests set by Sergeant and her team - with the British Standards Institute handed the opportunity to be the initial arbiter and accreditation body.

What came next was a predictable deafening silence. In a world where banks and insurers are accustomed to making their money through lack of transparency and exploitation of consumer apathy, the simple products model didn't look very attractive. CAT standard and Stakeholder products suffered from the same problem. Nice idea, no money in them.

But earlier this month - almost a year and a half after the conclusion of Sergeant's report - Barclays finally stepped up to the plate, becoming the first company to receive the BSI's simple financial product accreditation - in this case, for its life insurance product.

Not so simples

As I wrote a couple of weeks ago, Barclays has been acting a bit like a hyperactive cocker spaniel over the past year or so - launching all sorts of internal initiatives which it hopes will demonstrate that the dark days of Bob Diamond and his predecessors are behind them. It's done lots of good stuff - but disappointingly, its "simple" life insurance product is a bit of a half-job, and I struggle to see why the BSI was willing to give it its blessing (other than for the obvious reason).

Here's a little extract from page 2 of the policy document:

"In the following section ‘we/us/our’ refers to Barclays Bank PLC and Barclays Insurance Services Company Limited. Barclays Bank PLC arranges Life Insurance through Barclays Insurance Services Company Limited, which is a wholly owned subsidiary company of Barclays Bank PLC."

Yawn. Snore. Bin.

There's lots of other examples of legalese and jargon in the document, which doesn't to my mind meet Sergeant's second principle of simple products, which stipulates that language should be "Clear, straightforward and standardised...to enable consumers to understand and compare products."

The other, perhaps more important, thing that occurred to me as I ran through the application process was that the price wasn't very good either. Life insurance is a pretty simple product already - and the great detriment to people who buy Barclays simple version is that it will cost them over 60% more than it would to buy the cheapest policy through a discount broker such as Cavendish Direct. For £100,000 of cover over 25 years, Barclays’ policy would end up costing you around £1,300 more in premiums. Quite a price for simplification.

Sadly, what the simple products review seems to have confirmed is that the only products that it's possible to simplify are the ones that are pretty simple already. The rest of finance is complicated - and that's why we need a reliable, trustworthy financial advice sector and better educated consumers. I suspect that Sergeant knew that from the outset and that this was driven by politicians. The money and brainpower could have been put to so much better use.