Developers often debut a simpler-than-before financial product, explaining that they “decided to dummy this down a bit.”
That’s insider talk for making a very complex or large-scale product into one suitable for buyers seeking simplicity and/or box-like insurance solutions.
The practice is generally viewed as good. But it’s not without risk.
On the plus side, dummy-down products generally are praised as positives for consumers, systems and efficiency. The original product has been pruned of its excesses. Voila! It is now sleek as a snake–and without the venom.
The trend also has been deemed as good for increasing transparency and disclosure–a nod to critics of product complexity. That’s because the slimmer versions have fewer moving parts and typically are easier to understand, buy, manipulate and apply to needs than their full-blown counterparts.
Another favorite feature: The dummied-down products make big-case benefits and features more widely available to average buyers. That spells music to advocates from the “access to all” side of the fence.
For the providers, the products are seen as ways to broaden market penetration, increase sales and deepen profits.
All this is possible because many dummy-down products are scale backs of products originally built for the institutional, group and large-case markets. The developers cut out the bling and deliver the basic thing–and at a very modest R&D cost.
One example is the individual and/or small-group versions of full-featured 401(k) products. Another is individual health takeoffs of group health plans.
Likewise, some individual term policies and term-like universal life policies are “lite” versions of contracts first aimed at the jumbo market where very high face amounts reign. The junior versions typically sport lower minimum face amounts, less competitive pricing, fewer options, etc.