The Treasury had set up a small team of experienced members led by Ms Carole Sergeant that reported back in July 2012 as per the timelines set last year.
The committeeís approach is to keep the customer at the heart of this project and trying to mandate the approach the financial service companies and insurers should follow to restore some of the lost faith by the general public after the series of scandals in the last 18 months.
As part of the interim report, the committee has suggested that in its phase 1 – it would recommend three product sets in its first phase – 30 days easy access savings account – 30 days' notice savings account and life cover. In terms of income protection, the report suggests that everyone should be allowed to insure themselves for sickness cover for upto £1000 of benefit amount without any underwriting. For those who choose to cover above £1,000, should be allowed to cover upto 50% of their gross monthly income. While premiums will be still based on the age of applicant, all the flexibilities in terms of choosing the deferment periods and length of time for which the benefit amount can be covered will remain flexible. There are however complexities in terms of means tested benefits and employee benefits and hence there has been no consensus in the working group in terms of non-adviced income protection products.
Kesh Thukaram, Director of Best Insurance welcomed the interim report and said that it is high time people have access to simple products that are not complicated to buy and can be bought online without any involvement from any advisors. He added that while advice should be an option and should be necessary if the benefit amount is more than £1,000 a month, for customers wishing to protect themselves upto less than £1,000 it should be handled in a self-serve manner.
Income protection tends to be high the list of things people want to protect themselves in other countries such as USA, Australia, Canada etc but in the UK due to the benefit system and people tending to fall back on to benefits unless there is a huge sense of urgency ,people do not protect themselves proactively. The manner in which the insurers handle claims makes it mandatory for them to register at the Job Centre which in many ways pushes people to seek benefits rather than supporting them. With simple products, we have an opportunity to introduce products that will be simpler to buy and simpler to make a claim.
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