Expert Zone

Straight from the Specialists

Can we provide more cover at lower costs?

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

When it comes to financial products, does the general rule “low cost = low quality” hold true? By quality, I mean the quality of experience and service levels that should be expected from a standardised product.

One industry which consistently beats this rule is the electronic hardware industry which keeps packing in more punch into phones, laptops and cameras at more or less the same price or even at lower prices. For a limited period of time, the niche gadget charges a premium but very soon the same power gadget is available at a much reduced cost. Is it even fair to draw this parallel between a hardware industry and a service industry?

Does it require regulatory intervention to put an end to pre-payment charges on loans — and even then selectively? Does it require regulatory intervention to slash entry and exit loads on mutual funds? Does it require regulatory intervention to cut down the excessive charges on unit-linked insurance plans? Since time immemorial, interest rates on credit cards have been ridiculously high — once you get into the revolving credit trap with a card it’s almost impossible to get out.

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