The ability to deliver a consistent level of service across all channels is an increasingly important competitive differentiator for financial services providers. This was one of the outcomes of a recent international study of financial service consumers by Accenture. Besides the consistency, all channels, face to face or online, should also comply with all regulatory requirements. The provision of financial services via online platforms, i.e. robo-advice, is such a channel.
In the latest FAIS Ombud Annual Report, Naresh Tulsie emphasises that robo-advice solutions also need to conform to the provisions of the General Code of Conduct and that the required disclosures be made to ensure that the prospective client is placed in a position to make an informed decision as to whether the specific solution meets his/her financial needs and circumstances. Tulsie points out that there has been an increase in robo-advice complaints. “We have been successful in bringing about positive solutions by focussing specifically on the nature and extent of disclosures provided by these online solutions and whether the complainant had been able to appreciate the implications of the selections being made and whether those disclosures had been sufficient to have allowed the complainant the opportunity to make an informed decision,” he stresses.
A case in point
In a complaint received at the Ombud’s office, the complainant was the owner and the policyholder of a Medical Insurance policy, which commenced on 1 December 2015. The policy covered both the complainant and her husband, providing benefits for emergency medical services, illness and dread disease.
On 30 November 2017, the complainant’s husband complained of stomach pains which led him to contact the respondent for authorisation. On 2 December 2017, the complainant’s husband underwent a gastroscopy which led to him being admitted to hospital.
Preauthorisation was requested and declined on the basis that in terms of the policy wording, illness means the onset of any acute somatic, unforeseeable, unpredictable illness (excluding mental illness) which requires admission to hospital, and which was not a pre-existing condition.
The complainant stated that she was never advised about this exclusion of cover, and wanted the respondent to resolve the matter in respect of the outstanding medical expenses.
After entering into correspondence with the respondent, where the respondent’s duties to comply with the General Code of Conduct in respect of disclosures of material terms of the policy were explained, the respondent argued that the sale of this policy was done online via the website.
According to the respondent the complainant completed the documents on her own, and the application was submitted without any advice having been provided. However, the Ombud’s Office was of the view that the transaction, which amounted to robo-advice, did not absolve the respondent from ensuring that the complainant was made aware of the material aspects of the policy in order for her to be able to make an informed decision. As a result the respondent was requested to provide the Ombud’s Office with details of the process followed when one applies online, what disclosures are made and what information is provided to prospective clients in respect of the exclusions applicable to the policy.
The respondent did not respond to the requests from the Ombud’s Office. Instead, it took the decision to settle the matter with the complainant and an amount of R7 829 was paid in full and final settlement of the claim.
We trust that the provider was one of those to whom the Ombud referred when he said: “We have been successful in bringing about positive solutions by focussing specifically on the nature and extent of disclosures provided by these online solutions…”
While robo-advice capabilities are improving dramatically, several research studies have indicated that personal connections will remain essential for many clients. It’s about delivering a coherent experience across all channels and ticking all boxes, from advice to servicing, including TCF and all regulatory requirements.