Out-Law News | 19 Aug 2014 | 10:59 am | 1 min. read
A 2013 report by the Bank of England's former head of major banks' supervision Carol Sergeant (the Sergeant Review) recommended that a range of simple financial products be developed to be sold by financial services companies. It identified concerns about consumers' ability to select the right financial products to buy for them when the financial products being sold are complex and difficult to understand.
Since then work has been ongoing to develop a new standardised system for accrediting financial products as simple products.
A recent letter to the government (2-page / 497KB PDF) jointly signed by the Association of British Insurers (ABI), British Bankers' Association (BBA) and Building Societies Association (BSA) explained that the three bodies have been working with the Trading Standards Institute (TSI) to try to finalise a new simple products certification scheme.
However, the letter also highlighted work towards a rival certification scheme that is supported by the BSI which has now announced that a Barclay's fixed term life insurance product has become the first product to be certified as a 'simple product' in accordance with the BSI's certification process.
"Last year’s Sergeant Review highlighted the need for transparent, easy to understand savings and protection products that the public can trust to meet their essential needs," Howard Kerr, BSI chief executive, said. "The new BSI certification process - BSI Kitemark - gives consumers the confidence to make an informed and straightforward purchasing decision.”
In their letter, the ABI, BBA and BSA said steps had been taken to ensure the BSI's scheme and the TSI's schemes adopt a similar approach. The TSI's scheme is expected to be operational before the end of the year.
To protect against consumer confusion, the BSI's model will conform to "exactly the same product standard for term life assurance" as is set out in the Sergeant Review, they said. The same standards for simple products will apply across both the BSI and TSI's schemes and the "same logo and name" will be used by both schemes, which will run in parallel and use different accreditation, monitoring and compliance processes, the letter said.
"While multiple accreditation frameworks were not envisioned in the development of the simple products initiative, we think that with careful handling it will be possible for the two to co-exist successfully," the trade bodies said.
Carol Sergeant said she was happy to see progress being made following her review.
“All mainstream providers of financial services should offer their customers the opportunity to buy independently certified simple financial products, and I look forward to more firms introducing these products," she said.