Consumer Expectations from TCF

There was a time when actuaries at product houses spent endless hours developing a product, packaging it, and then sending it to the marketing division with the message: “Go out there and find customers for it”.

Hopefully, they have since learnt that you have more success if you determine a need first, and then create a solution for it.

Metropolitan recently conducted a survey in the mass market to establish client expectations in terms of being treated fairly, as well as how the industry is perceived to be delivering on those needs. This has certainly brought a new perspective to the TCF table – implementation should not only be guided by what the FSB prescribes in the six expected outcomes, but also what client expectations in various market segments are.

In reaction to the survey results, Belinda Faulkner, Brand Executive at Metropolitan, commented:

“It is important to apply the formal expressions of TCF but it is equally important to obtain the consumers’ view of what matters to them in terms of fairness and to align the two.”

This view is confirmed by the FSB in their response below.

The survey conducted by Metropolitan shows that South Africans in the mass market deem equal treatment, without bias based on demographics such as race, gender, age, location, disability and health status, as very important.

While the general treatment of customers was felt to be fair, a specific shortcoming concerns clear and regular communication regarding products and benefits. This is, ironically, also something that the FSB is currently involved in – the development of “key information disclosure” documents to assist clients in making an informed decision.

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Another interesting finding of the survey is that the industry scored 8.5 out of 10 as an overall rating. It is noted that this should be viewed as a “moderate” score in a market which is generally uncritical.

Ms Leanne Jackson, Head of Treating Customers Fairly at the FSB, responded as follows:

The FSB noted the press release regarding Metropolitan’s “Fairness Feedback” survey with interest, and welcomes efforts by the financial services industry aimed at determining and responding to real customer needs and expectations. Although we have not had sight of the full findings, based on the summary in the press release the findings generally appear to support and complement the FSB’s own views, as articulated in the 6 TCF Outcomes, regarding the key components of fair customer treatment. The feedback also reinforces the fact that what will constitute meaningful delivery of these Outcomes in practice, will vary across customer groups and product types. It is therefore vital that firms implement the TCF framework based on indicators and insights that are tailored to their particular business models and target markets.

The value which the participants in this survey placed on the “equality” dimension is a case in point. The TCF framework does not equate fair treatment with equal treatment, and by no means suggests that fair, risk-based underwriting is unacceptable. It does however require regulated firms to consider customer needs and reasonable expectations. Insurers who find the participants’ views on “equal treatment” relevant and useful for their business models, may therefore choose to consider whether or how this insight should influence their implementation of some or all of the TCF outcomes – such as product design and pricing, customer communications, distribution strategies, managing customer expectations or claims handling practices. More generally, they may also wish to consider what this customer perspective means for their ability to gain customers’ confidence in their commitment to a fairness culture.

The FSB also found it interesting to compare these “demand side” findings with the “supply side” findings reflected in the TCF Baseline Study feedback report. It is interesting to note, for example, that the customers surveyed by Metropolitan scored insurers lowest on the communication dimension, whereas the self-assessed view from insurers participating in the TCF Baseline is that communication is one of the TCF Outcomes they are most successful at (although the FSB appreciates that the samples of insurers considered in the two surveys differ).

Divergent views, such as those indicated in the last paragraph above, are a very good indicator of the need for the resetting of the moral compass which lies at the heart of the drive for treating customers fairly.

Please click here to download a copy of the Metropolitan media release.

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