From another thread on credit card company shenanigans, Martha comments on policies and competiton:
I wonder how we can fix this problem of increasingly complicated products that gum up competition. Look at the amount people spend on these products Martha mentions (add in mortgages, home data and telecom services, etc)--I'll bet they account for 50% of consumer spending, and yet the marketplace for these services is highly inefficient because the information needed to make the choices is difficult to use. This results in higher costs and, ultimately, less satisfactory services.
The providers of these services like an inefficient market and data glut--it decreases competition and improves profits.
So, what's the answer? Some options:
A) Leave things as they are. Companies will continue to add to the complexities (and "gothchas" to improve profits). Some of the complex "frills" added will be useful to consumers, and the companies offering them will get a deserved competitive advantage. If it gets bad enough it will self-correct as companies will look for a competitive advantage by marketing simpler products and people will buy them.
B) Standardize products: Administered by the government or by "encouraged" voluntary compliance. The standardized packages allow consumers to pick the standardized package that best suits their needs, then compare providers by price and quality of service. This would be similar to the standardized Medigap insurance policies (Choose one: A-L). One Con: stifling of innovative new product types.
One Pro: Of the ideas here, this is the only one that could prevent the further proliferation of niche fees in the fine print of contracts (late fees, double-cycle billing, $10 per text message when you go over the amount allowed in your package, etc)
C) Modeling: If consumers could go to a single web site for each type of product and enter their anticipated use info (e.g. cell phone minutes each month, text messages sent/received, etc), then the costs of that service from all the providers in their area could be calculated. Sensitivity analysis could be included (e.g. "If you increase or decrease your text messages by 10%, your costs could go up or down by as much as $30 per month).
Pros: This modeling would not hamper innovation as much as Option B above.
Cons: Who would build the model? Do we want the government doing this? Maybe a consumer group like CU?
D) Required pricing info for several standardized customer profiles: Therr'd be no mandatory standard packages, but the providers would need to show the monthly fee and a brief sensitivity analysis for 5-10 standardized "customers" in their marketing literature and web sites. The consumer could compare the cost of service among providers for the customer profile closest to his. This would be easier to implement than Option C, and less constraining on the free market than Option B. This option will not reduce the complexity of products.
Increasing the efficiency of these markets is a net benefit to everyone. The challenge (IMO) is to do it without increasing the role of government in our lives.
I wonder how we can fix this problem of increasingly complicated products that gum up competition. Look at the amount people spend on these products Martha mentions (add in mortgages, home data and telecom services, etc)--I'll bet they account for 50% of consumer spending, and yet the marketplace for these services is highly inefficient because the information needed to make the choices is difficult to use. This results in higher costs and, ultimately, less satisfactory services.
The providers of these services like an inefficient market and data glut--it decreases competition and improves profits.
So, what's the answer? Some options:
A) Leave things as they are. Companies will continue to add to the complexities (and "gothchas" to improve profits). Some of the complex "frills" added will be useful to consumers, and the companies offering them will get a deserved competitive advantage. If it gets bad enough it will self-correct as companies will look for a competitive advantage by marketing simpler products and people will buy them.
B) Standardize products: Administered by the government or by "encouraged" voluntary compliance. The standardized packages allow consumers to pick the standardized package that best suits their needs, then compare providers by price and quality of service. This would be similar to the standardized Medigap insurance policies (Choose one: A-L). One Con: stifling of innovative new product types.
One Pro: Of the ideas here, this is the only one that could prevent the further proliferation of niche fees in the fine print of contracts (late fees, double-cycle billing, $10 per text message when you go over the amount allowed in your package, etc)
C) Modeling: If consumers could go to a single web site for each type of product and enter their anticipated use info (e.g. cell phone minutes each month, text messages sent/received, etc), then the costs of that service from all the providers in their area could be calculated. Sensitivity analysis could be included (e.g. "If you increase or decrease your text messages by 10%, your costs could go up or down by as much as $30 per month).
Pros: This modeling would not hamper innovation as much as Option B above.
Cons: Who would build the model? Do we want the government doing this? Maybe a consumer group like CU?
D) Required pricing info for several standardized customer profiles: Therr'd be no mandatory standard packages, but the providers would need to show the monthly fee and a brief sensitivity analysis for 5-10 standardized "customers" in their marketing literature and web sites. The consumer could compare the cost of service among providers for the customer profile closest to his. This would be easier to implement than Option C, and less constraining on the free market than Option B. This option will not reduce the complexity of products.
Increasing the efficiency of these markets is a net benefit to everyone. The challenge (IMO) is to do it without increasing the role of government in our lives.
I hope the health insurance exchange, if it comes to pass, does this adequately. There also likely will be an element of standardization through minimum standards. 
