The term ‘risk based and proportionate’ is one of the important cornerstones of how market conduct will be assessed and regulated in future.
The following possible sources of conduct risk were identified:
- Culture & governance
- Product value
- Unfair contract terms
- Misleading advertising
- Ineffective disclosure
- Poor claims handling
- Poor complaints handling
We recently expanded quite a bit on the last two, as it will provide a very clear guideline to the Regulator on how successful you are in addressing the first five. There is also a lot of synergy in respect of the structures you are required to have in place for both claims and complaints.
At the recent Conduct of Business Seminar, details were provided of a thematic review to identify common trends pertaining to the manner in which insurers identify and manage risks to fair customer outcomes when handling claims.
Client dissatisfaction regarding claims will inevitably lead to a complaint. It is therefore necessary look again at the current definition of a complaint:
A “complaint” means an expression of dissatisfaction by a person to a provider or, to the knowledge of the provider, to the provider’s service supplier relating to a financial product or financial service provided or offered by that provider which indicates or alleges, regardless of whether such an expression of dissatisfaction is submitted together with or in relation to a client query, that –
- the provider or its service supplier has contravened or failed to comply with an agreement, a law, a rule, or a code of conduct which is binding on the provider or to which it subscribes;
- the provider or its service supplier’s maladministration or wilful or negligent action or failure to act, has caused the person harm, prejudice, distress or substantial inconvenience; or
- the provider or its service suppliers has treated the person unfairly;
The Thematic Review consisted of visits to 11 Long- and 10 Short-term insurers.
There were nine assessment criteria against which each insurer was measured on a five point scale.
Put differently: if this was a regulatory exam, not one of them would have passed.
The findings will be used by the FSB as a point of reference when supervisory conduct of business reviews are conducted, and/or when complaints are received by the FSB.
The presentation concludes:
What is expected under an outcome based supervisory approach with regards to claims handling?
That principles and outcomes that speak to fair outcomes for customers must be operationalised in the claims and other processes.
This is the measurement of the prevalent culture in the organisation.
Having the prescribed systems in place, would have been in order when compliance was still a matter of ticking the right blocks. Now you are required to prove that you are also acting in the spirit of fair customer outcomes.
Herewith a short piece of history to conclude this sermon:
A person who is required to be above suspicion.
This expression comes ultimately from Plutarch’s account of Julius Caesar’s decision to divorce his wife Pompeia. Thelibertine Publius Clodius, who was in love with Pompeia, smuggled himself into the house in which the women of Caesar’s household were celebrating a festival, thereby causing a scandal. Caesar refused to bring charges against Clodius, but divorced Pompeia; when questioned he replied:
“My wife should be as much free from suspicion of a crime as she is from a crime itself.”