Treating Customers Fairly and Complaints Management

Sometimes, something that appears insignificant can have rather important ramifications.

The Regulator recently requested all registered short-term insurers who are members of the Short-term Ombudsman (OSTI) to provide full details of personal lines claims for 2013. The purpose is to allow the Ombud to publish claims versus complaints ratios in his annual report.

The rationale behind this is one of the first instances of how Treating Customers Fairly (TCF) will become part of our lives over the next few years.

If you thought that it would impact on product providers alone, think again.

Outcome 6 of TCF reads: Customers do not face unreasonable post-sale barriers to change products, switch providers, submit claims or make complaints.

In the TCF Road Map, published in 2011, the interaction between the Regulator and the various Ombud schemes is outlined as follows:

Even the most comprehensive and rigorous of regulatory frameworks cannot guarantee that instances of abuse will never occur. Inevitably, some customers will be treated unfairly. It is therefore essential that such customers have ready access to simple and effective alternative dispute resolution mechanisms. In this way, they can be assured of “ultimate fairness”, even where the broader TCF framework has failed them.

In their dealings with individual customer complaints, these Ombud schemes are ideally positioned to provide the FSB with examples of emerging negative conduct trends and examples of specific unfair business practices. A number of the existing schemes have been helpful in providing the FSB with some of the examples of unbecoming conduct set out in the TCF Discussion Document. Going forward, the Ombud schemes will play an important role in supporting the FSB’s aim to carry out pre-emptive supervision – both at macro (industry) and micro (firm-specific) level.

Equally, the Ombud schemes will need to keep abreast of the proactive monitoring findings of the FSB, and the developing TCF regulatory framework, to assist them in recognising examples of abusive practices or TCF breaches in the cases referred to them. Individual matters dealt with by the Ombud schemes will also provide valuable insight into the effectiveness of the TCF regulatory framework as it unfolds, and help to identify gaps in the framework.

Ongoing information sharing between the FSB and the Ombud schemes will therefore make a vital contribution to all three of the TCF pillars: Designing the TCF regulatory framework, implementing TCF, and enforcing TCF.

The call for claims information, referred to above, is therefore one of the first examples of such collaboration between the Regulator and the Ombuds.

Intermediaries need to take note that their role, where such complaints are investigated, may also come under the spotlight in terms of what they do to ensure fair treatment of their clients.

Hjalmar Bekker, Director of Moonstone, notes:

Complaints handling will take on a new format in future. The current focus is merely aimed at the advice process, and averting FAIS Ombud attention.

In future, any complaint, including those concerning the product provider, will require attention from the FSP as well. This will impact on

• your systems and procedures
• data management (to determine trends)
• how you react to complaints, including for instance poor product provider service and
• implementing work flow mechanisms to speed up finalisation of complaints

This is an aspect which has not, as yet, received much attention in the TFC debate, but is destined to become part of your daily life and TCF obligations in the near future.

It is evident from the above that the Regulator is serious about the industry conforming to the spirit of legislation, and closing the gaps for those who try to use legal loopholes.

The switch to outcomes-based regulations, like Treating Customers Fairly, will make this a lot easier. You may have fulfilled the legal obligations, but if there is evidence that the client was prejudiced, you could still be held accountable.