Scepticism greets plans for launch of 'simpler and cheaper' protection
Which? is developing a stake-holder protection product aimed at making cover cheaper and easier to understand.
Speaking to COVER magazine, Mick McAteer, principal policy adviser at Which?, revealed the consumers' association will launch a stakeholder protection offering later this year.
"As with pensions we think there has to be some kind of alternative solution to meet the average earner's needs. Therefore, we are trying to develop a simple product," he said.
McAteer said he did not think the stripped down products offered by the insurance sector will ever meet the needs of the general public.
He said: "Even simplified products such as Virgin Money's cancer cover require a minimum premium level if they are going to be economic for the provider.
"Therefore, even the most efficient provider would struggle to reach the mass market.
"An alternative solution must be developed."
McAteer said he thought stakeholder protection could be the solution and slammed claims suggesting stakeholder pensions have been a failure.
He argued: "A lot of people have criticised stakeholder pensions but we think that they have been a great success.
"I think many people have forgotten what they were set out to do. Originally, they were designed to fulfil three objectives – bring competition to the market, stamp out mis-selling and make more people save for their retirement.
"In terms of the first two objectives they were a great success and they only failed when it came to the third due to people's general lack of spending power," he said.
However, Peter Chadborn, principal of IFA firm CBK, disagreed.
He said: "Stakeholder pensions have been a total failure as they have not helped low- to middle- income earners save more for their retirement, which was their main purpose."
Voicing doubts about stakeholder protection, Chadborn said he was also concerned it would make people look at price rather than quality when buying protection.
"If stakeholder protection gets people to buy protection then that is a good thing; however, it won't. It will only get people to think the cheapest is the best. It will be in the same ballpark as buying protection from the supermarkets," he argued.
· Feedback from Which?. We would like to clarify that Which? is working on developing a benchmark or 'stakeholder' protection product model. The design features will be based on the principles behind stakeholder pensions. However, we would like to make clear that we would not be actually providing the product, the intention is that industry and other alternative providers would be able to provide this product.
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