Amidst public outcry for the reform of the banking sector since the 2008 financial crisis, the Sergeant Review was instigated with the goal of radically overhauling essential financial products. Last Friday marked a noteworthy day in the provision of affordable insurance products, as Barclays released the first product deemed acceptable by the government body responsible for the review.
Barclaysí product, a revamped life insurance policy, has met the requirements of the British Standards Institution (BSI), and customers hope it will represent a watershed moment in the distribution of cheap, simple savings products.
The Sergeant Review sought to fundamentally repair the many cracks in the system concerned with the provision of savings & insurance products, giving ëkitemarksí to servicesí which meet the Reviewsí criteria. These ëkitemarksí act as indicators for confused consumers seeking for the best deals.
Mark Hoban, financial secretary to the treasury during the planning of the Review, said at the time: ìConsumers need to know what they are buying, they need to have confidence that the products they are buying do what they say on the tin. People need to be able to compare like for like.î
Sergeant Review findings
Completed last year, the Sergeant Review identified a perceived lack of transparency in many products offered by financial services, causing consumersí to make rushed decisions, regarding comparison, rooted in ignorance.
As such, consumersí faith in the system in place has been dented and the Review found much reform was needed. Outlining 9 principles on which the development of simple financial products should be based on, the Sergeant Review called for a comprehensive overhaul.
These 9 principles include the use of clear, concise language and consistency in presentation between competitors to aid comparison for consumers; reasonable and lucid charges and fees (as opposed to sneaky and convoluted) for consumers; clearer structure as a whole (regular updates on customer benefits, understandable pricing, standardised product names etc).
It would seem Barclaysí fixed-term life insurance policy is the first product to attain approval from the body, and given the tough, yet appropriate, demands of the Sergeant Review, it must be considerately designed indeed.
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.”
Criticism of Competition
Part of the reason the review was initiated was due to peopleís apathy regarding the comparison of financial products in the market. In fact, masses of people were failing to guard themselves financially, even turning to the shadiness which accompanies the payday lending industry.
Carol Sergeant, leader of the Sergeant Review, said: “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.”
“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.”
Sergeant went on to bemoan the uneasiness felt by savers when comparing the vast range of products available to them, criticising the inadequate practices within the savings market. This is a perspective mirrored by consumer group, Which?.
In a recently released report, Which? identified a number of general failures in the market which are misleading and warp healthy competition, increasing the difficulty faced by consumersí in their search for the best deal.
Which? has led clamour for the Financial Conduct Authority (FCA) to invoke its regulatory powers over competition, and reshape the market through the eradication of some of the shady practices identified.
These practices include auto-renewal services, bad customer relationships, convoluted switching processes and high-interest, promotional account which, following the conclusion of the promotional period, offer terrible value for savers.
“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.”