Complaints Management the TCF way

Two important FSB documents which saw the light this week see a firm shifting of Treating Customers Fairly (TCF) from a theoretical basis to a practical one.

The publication of the TCF Complaints Management Discussion Document coincided with a report from the Regulator on the key findings of a “Complaints Management Thematic Review”, conducted between April and June 2014.

The actual discussions leading to these documents started in February 2013 at the multi-stakeholder TCF Regulatory Framework Steering Committee. This body is represented by representatives of the FSB, the National Treasury, the SA Reserve Bank, various industry and professional associations and Ombud schemes.

In the thematic review, a sample of 21 insurers was reviewed, comprising 9 long-term and 12 short-term insurers. The sample group contained a mix of intermediated and direct business models, as well as small, medium and large insurers. The review also focused on retail/personal lines insurance operations.

Additional criteria used when selecting specific insurers included:

  • The number and nature of complaints referred to the FSB
  • The number of complaints referred to the long-term and short-term insurance Ombud schemes respectively; and
  • The ratio of claims overturned in favour of the client as published by the Ombud schemes.

While it may appear odd to start the practical implementation of TCF with the last of the six outcomes, which focuses on after sales service, it is actually the logical place to do so.

  • Many clients often only discover problems when trying to change a product, switch providers, submit a claim or make a complaint, which are problems that TCF outcome six sets out to address.
  • By focusing on the actual experiences of clients, the public is likely to feel the practical impact more directly than if the first five were first attended to.
  • By focusing on outcomes, the factors leading to unsatisfactory ones will be easier to identify.

Billy Seyffert, COO of Moonstone Compliance, notes that the six outcomes follow the life cycle of a product, but do not necessarily have to be implemented sequentially.

Complaints Management Framework

The discussion document provides the following guidelines to an overall regulatory framework for complaints management, listing the following prescribed components:

  • Consistent regulatory definitions of “complaint” and related terms.
  • Standards and requirements for firms to implement internal complaints management processes, including record keeping, monitoring and analysis.
  • Requirements for TCF aligned categorisation of complaints.
  • Requirements in relation to the engagement between firms and Ombud schemes.
  • Requirements for reporting complaints information to the regulator.
  • Requirements for public reporting of complaints information.

TCF Progress Barometer

The six TCF Outcomes constitute a set of principles against which the conduct of business of firms in relation to their customers, as well as the effectiveness and suitability of the regulatory and supervisory approach of the FSB (as market conduct regulator), will be tested.

Against this background, it makes sense for both firms and the regulator to be able to use complaints information to measure the industry’s progress in delivering the TCF Outcomes, and to identify and mitigate risks to the delivery of those Outcomes.

To achieve this, the FSB proposes that financial institutions be required to manage and categorise complaints in line with the TCF Outcomes.

The scope of the discussion document appears to focus more on product providers. As far as smaller FSPs are concerned, the document takes cognisance of the detailed obligations already placed on them in the Code in relation to complaints management and notes that an alignment between these and the new proposals in the future is possible.

In view of the broad range of types and scale of financial services providers authorised under the FAIS Act, the principles of risk-based and proportional supervision will be applied to determine the level and type of regulatory and/or public complaints data reporting required by different categories of providers.

A lot of work is needed before the final implementation of these guidelines, including embedding the above components into the current regulatory framework, “…pending the development of a more overarching market conduct regulatory framework under Twin Peaks.” In addition, the Regulator “…recognises that certain of the proposed definitions differ from existing definitions in current legislation.”

The closing date for comment is 1 December 2014.

Please click here to download a copy of the discussion document, and the thematic review.


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