BANKS and insurers will be forced to offer simple, standard and easily comparable products, the Treasury announced yesterday in a new drive to make it easier for customers to understand what they are buying.
The new products should also help ensure finance firms are not hit by any more mis-selling scandals in future by offering a basic product with no frills or unusual clauses.
Initially the plan will cover an easy access savings account and a 30-day notice account.
It is also intended to cover a regular savings account and a fixed term life insurance product.
They will all comply with new rules covering product features, terms and conditions and price transparency.
The consultation argues the change is needed because there is “too little awareness of the benefits of managing personal finances effectively”.
It also added that “an overwhelmingly complicated marketplace” makes choices difficult.
British Bankers’ Association boss Anthony Browne welcomed the plan.
“The common goal for the government and the financial services industry is to enable all consumers, whatever their level of financial awareness, to plan for their financial futures and make financial decisions with confidence,” he said.
WHAT CAN WE EXPECT FROM THESE NEW SIMPLIFIED PRODUCTS?
Q and A
Q Why is this happening?
A The government fears customers do not have the knowledge, ability or time to properly compare financial products, and so are losing out as they try to save or buy insurance. An extreme example of this is the payment protection insurance mis-selling scandal, where millions had no idea they were buying an unsuitable product.
Q Which products will be covered?
A Four products are planned – an easy access savings account; a 30-day notice account; a regular savings account; and a fixed term life insurance product. All of them will get a Kitemark badge from the British Standards Institution.
Q What next?
A Trade organisations will negotiate the exact details with the BSI, covering topics like language used and comparability on price. Meanwhile the Money Advice Service will provide guidance when the products are launched.