It also called on the government to clarify its ‘simple’ definition and suggested a one-size-fits-all approach across the industry will not work.
In its reply to the Treasury discussion paper on simple financial products, the Association said it supported the initiative and its desire to help people understand the products they need, make better choices and encourage market competition.
However, the ABI raised concerns that the scope was currently too wide and it should only “initially focus on helping consumers save for their future and protect their families”.
“In particular, we suggest there is a consumer need for a straightforward loan protection insurance policy designed to help consumers maintain debt repayments when they fall into financial difficulty due to illness or unemployment,” its response said.
“We believe consumer groups and the industry should jointly agree the other consumer needs and financial products which should be prioritised.
“Indeed, based on stakeholder feedback, the ABI is already taking forward a number of initiatives in the general insurance market which may benefit from being formally included within the scope of the simple products initiative,” it added.
While supporting many of the paper’s aims, including the lack of a price cap, the ABI raised two significant issues related to the ‘simple’ definition and industry-wide implication.
It said the government should be clear what is meant by ‘simple’. It said such products should be straightforward for consumers to understand, but not necessarily require a simplified underwriting process or composition that could increase costs for consumers.
The ABI added: “[We do] not believe a one-size-fits-all approach to simple products will achieve the government’s visions and objectives. It is important to recognise that a different approach could be required for different financial products depending on the characteristics of the product and the target audience.”
Helen White, acting director of life and savings at the ABI, said: “Because different consumer groups have different needs, we need to progress a range of initiatives – from voluntary standards, to benchmark products, to a new range of simple products – in order to achieve this; a one-size-fits-all approach will not work.
“This goes hand-in-hand with the need to improve financial education so that people can confidently compare and understand products to ensure their specific needs are met.”
