Insurance: The complications that apply to simple products
At the end of last year the ABI, BBA and the BSA announced the approval of the Simple Product Framework. The framework is to be independently controlled by the Trading Standards Institute (TSI) Consumer Codes Approval Scheme (CCAS) Board.
You may not have heard of CCAS unless you followed what happened to the OFT Codes scheme. This scheme applied to sectors of the industry where groups of companies could get together and provide services that were better than the average. As such an industry wide code, like the ABI Statement of Best Practice on Critical Illness would not have qualified. The rules have now been changed to allow such schemes but otherwise the Code requirements are pretty similar and existing codes have been transferred across to the TSI following the winding up of the OFT.
So what will the SPF look like? Apparently it will be “in line with” the recommendations in the Sergeant Review (March 2013) which made the case for Simple Products – a suite of financial services products with standardized features that are easy to understand and transparent.”
At the time of writing we are left guessing what that might mean. So where better to seek some clarity that the old OFT Code scheme. This view is supported by the statement from Baroness Crawley, chair of the CCAS board, that: “We are delighted to welcome the Simple Products Codes of Practice into our family of Consumer Codes, a hallmark for excellent consumer protection and customer service. Not only does the Simple Products Code help financial institutions distinguish their products from those of competitors, it gives peace of mind to consumers that if something goes wrong, they will be dealt with fairly and transparently by businesses under the terms of the scheme. We want consumers to further recognize that a business showing an approved code logo is a business they can trust.”
To ensure a fit with CCAS codes we now know that the Simple Product Framework will not just be controlled by the CCAS. Instead there will be a Simple Product Steering Board with membership to include the Citizens Advice, Financial Services Consumer Panel, Macmillan, and the Money Advice Service.
But what else? Here are a few features from the exiting Codes scheme that could be applied. The code sponsor could be required to establish an independent disciplinary and sanctions panel to ensure that any breach of the Code is dealt with as effectively, impartially, and quickly as possible? Code members could face robust sanctions for breaching it? The Code could include measures to remove consumer concerns and undesirable trade practices. For example, taking on board in full the rulings on Mortgage Payment Protection Insurance/ Payment Protection Insurance for the products covered by the Simple Products Framework? It could make sure that consumers are protected from high-pressure selling techniques that may lead them to make an ill-informed and incorrect purchasing decision? Maybe they should be made aware that there are better products out there? It could provide clear and fair contractual terms and conditions. Maybe by removing the “continuing obligation to disclose”? Just a few thoughts.
But when you boil down CCAS codes to their essence they are about going the extra mile above what consumers can expect from the rest of the market. How does this fit with being sold a life insurance policy without terminal illness cover? Simple products have proved to be far from simple. When you’re in a hole stop digging. If I were the CCAS I wouldn’t have touched this with a bargepole.
Written by Richard Walsh. First published in Cover Magazine, January 2015