A range of simplified easy-to-compare financial products should be introduced to help to restore consumer trust in the industry, a Treasury-commissioned review has recommended.
The report said a kitemark badge should be introduced to help people to identify the products and an independent body should be set up to ensure standards are being met.
A simple easy-access savings account, a 30-day notice savings account and a simple-term life insurance product are the first three simplified products which should be developed, to increase competition and make it easier for people to shop around, the document said.
The report estimates that 15.5 million households or 29.4 million adults with incomes above £15,000 but below £50,000 could benefit from simplified savings products. Those with incomes of £50,000 or above are more likely to use the services of a financial adviser,
Some 9.7 million households or 19.8 million adults fall within the target market for simplified life cover, the report found.
The initial recommendations have been made by an independent steering group chaired by Carol Sergeant, who was formerly chief risk officer at Lloyds Banking Group. The initial findings, which follow a consultation launched two years ago, come at a time when banks are trying to rebuild their reputations following a spate of incidents such as Barclays’ Libor-fixing scandal and NatWest’s two recent IT hitches.
The widespread mis-selling of payment protection insurance (PPI) which is predicted to become the biggest consumer financial scandal of all time, has also dented customers’ confidence. Lloyds Banking Group’s PPI bill alone has soared to £4.3 bn, it was revealed last month. Ms Sergeant said: “When consumers arrive at the financial marketplace there should be simple processes and products available to allow them to make an informed and straightforward decision.”
The initial recommendations in the Sergeant Review of Simple Financial Products interim report will be open for further consultation, ahead of a final report in February 2013.