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Last Updated: Saturday, 17 September 2005, 13:00 GMT 14:00 UK
Sell simple products, insurers told
By Paul Lewis
BBC Radio 4's Money Box

Economic Secretary to the Treasury, Ivan Lewis
The minister said it is early days but there had been progress

Insurance industry members should offer the government's new low-cost investment products or risk losing market share, a Treasury minister has warned.

Ivan Lewis MP told BBC Radio 4's Money Box programme: "Consumers want simple, affordable and accessible products, and I think anybody in the industry that does not face up to that in the end is going to be a loser."

He was speaking as the government launched a 4m advertising campaign to promote the concept of the simple, low-cost stakeholder range of investment products.

They include a cash savings account, and what the government calls a "Medium Term Investment" for putting money away for 5 to 10 years.

We now want to raise the ante considerably
Ivan Lewis MP
Mr Lewis confirmed that only a handful of providers were offering either of those products, though stakeholder Child Trust Funds and pensions were more popular.

"I think as the market changes, inevitably providers will come on board," he said. "And we will keep applying the pressure, keep engaging in the dialogue.

"But we are pleased with the way it is going. We accept that it is a gradual start, but we now want to raise the ante considerably.

"It is very, very early days, but I believe the evidence points to significant progress."

'Slow start'

Many in the insurance industry remain sceptical.

Chris Kenny, ABI
We would like to see change in the regulatory regime
Chris Kenny, ABI
The programme was told by Chris Kenny of the Association of British Insurers (ABI) that sales had been disappointing in the first three months after the new products were available, just 92m out of nearly 3bn total sales.

"It has been a fairly slow start," he said. "One or two people had very high expectations that somehow the market would be transformed overnight. That has not happened.

"If we look at our latest numbers, stakeholder products account for about 3% of the total new business of the insurance industry."

Ivan Lewis confirmed that they wanted the new products to extend the saving habit to people with less money.

"We want people - particularly those on low incomes - to see saving as a realistic option," he said. "We can no longer tolerate society - or an economy - where a large number of people are excluded from the savings opportunities that many of us take for granted."

Mr Kenny said it was "too early" to say if that objective was being achieved.

And he called on the government to reduce some of the rules which apply to selling the new products.

"We would like to see change in the regulatory regime, to make things move rather quicker," he said.

"If we look at regulation, we have got a system which really isn't the light touch regulation envisaged. It is rather more medium touch."

BBC Radio 4's Money Box was broadcast on Saturday, 17 September, 2005 at 1204 BST.

The programme was repeated on Sunday, 18 September, 2005 at 2102 BST.

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