Oh, right, that kind of protection

Coming in to work this morning, I was surprised to discover that Tom Baigrie had finally managed to get his generic life assurance campaign off the ground.  At Euston I saw a 48-sheet poster featuring a good-looking, half-dressed and distinctly smoochy-looking young couple with a headline that says:  Powerful Protection Never Felt So Gentle.

The headline seemed a little odd:  does life assurance ever seem “gentle”?  Is gentleness a benefit that consumers appreciate?  And what would it actually be like in life assurance?  Am I right in thinking that a life company only really gets to be “gentle” at the time of a claim?

As I pondered these issues, my eye drifted gradually to the bottom right corner of the poster, and I realised that I was on the wrong track.  “NIVEA Sensitive,” the logo said.  Not the kind of “protection” I’d been imagining at all.

One mis-selling scandal that won’t give the regulator headaches

I’ve come across a corner of the market still maintaining some deeply unfashionable attitudes towards its end-customers.  There’s a complete lack of transparency, for one thing – it is literally impossible to discover where your money is going, and who’s making what in the value chain.

Of course, in this fog of secrecy, there’s a lot of really disgraceful pricing behaviour going on.  In just a few seconds on Google, I could find one product on offer for almost exactly seven times the price of another identical one – and when I say “identical,” I mean identical in every way except the branding and presentation.

And finally, in this deeply disreputable part of the market, arguably the worst of it is that if you ask a professional adviser for an opinion, you’ll very likely be advised to choose the most expensive option.  (This is plainly and simply a consequence of commission bias – the adviser gets paid miles more by the manufacturer of the expensive brand.)

Should the regulator be told?  Well, you can try, but he won’t be very interested.  Anyone familiar with my little presentational tricks will have realised by now that the market I’m describing here has nothing to do with financial services:  it is in fact the market for over-the-counter painkillers, and specifically for the painkiller Ibuprofen.

If you choose the leading branded version, Nurofen, you can buy 32 200mg tablets for £5.  If you choose the unbranded version, you can buy 24 400g tablets for £1.05.  I reckon that makes Nurofen just about seven times more expensive.

The question arising is obvious:  is this a scandal, or not?  (And, I suppose, in particular, is it a scandal when that “professional adviser” – in this case a pharmacist – suggests you should buy the expensive brand?)  Some would say that when the prices of the two alternatives are so readily comparable, caveat emptor applies.  But others would say that in the complex and obscure world of pharmaceuticals, it’s unreasonable to expect consumers to have the expertise and confidence to buy well:  there is what the FSA likes to call an “information assymetry” which manufacturers and retailers can exploit to their advantage.

I understand that issues of opacity and overcharging are arguably more important in financial services, for two main reasons.  First, the sums of money involved are larger (although I strongly suspect that a lot of consumers will spend more on pharmaceuticals than financial services over their lifetimes).  And second, the consequences of bad behaviour are more serious in financial services:  after all, in investments, excessive charges cost the consumer twice over, once in themselves and twice in reduced performance.

Still, if the scale of the issue is different, the principle is the same.  Are we regulated too much?  Or OTC pharmaceuticals too little?  Or both?  You tell me.