In a recent newsletter, the Ombudsman for Long-Term Insurance stated that her office has received an increasing number of accidental cover further explains that these accident policies were often sold by means of direct marketing, i.e. telesales, without giving proper advice to clients. If policy terms aren’t explained in an easy-to-understand manner – for example by highlighting that only accident claims, not those due to natural causes, will be covered – it can lead to disappointed expectations. This is especially concerning where policies are sold to financially unsophisticated consumers.
Poor consumer outcomes go against the principle of running a sustainable business, so why is it that some financial service providers continue to deliver subpar services to clients? There are several reasons, but one contributing factor is that some businesses are reactive instead of proactive.
How to be proactive and improve customer outcomes:
In the financial services industry, everyone should know the principles of Treating Customers Fairly (TCF). These outcome-based principles have enabled the industry to use market conduct indicators as tools to get to the root cause of challenges, which in turn enables service providers to implement corrective action.
Here we explore three of the most relevant TCF Outcomes, as well as market conduct indicators and corrective actions, in the context of the recent matter raised by the Long-Term Insurance Ombudsman.
Outcome 1: Customers are confident that they are dealing with firms where TCF is central to the corporate culture.
Product providers should continuously monitor and analyse TCF market indicators, such as the number of and reasons for claim rejections, consumer complaints and the reasons for these complaints.
This can help them get to the root cause of claim rejections and complaints, and they can use this information to implement effective corrective actions. Without proper root cause analysis of market conduct indicators, corrective actions will be futile. The root cause of many challenges can be found in the breach of one or more of the TCF Outcomes, which is why conduct indicators are critical tools within the business.
Outcome 2: Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.
Market conduct indicators that need to be reviewed (in addition to those already mentioned) are sales, lapse and cancellation numbers. Low sales numbers and high lapse and cancellation numbers can indicate that the product does not meet the needs of the customer group or that it is not targeted accordingly. In addition, market conduct indicators shouldn’t be reviewed in isolation. For example, high sales numbers seems positive, but high sales numbers in the context of high lapse or cancellation numbers is a negative indicator and should raise questions within the business.
Outcome 3: Customers are provided with clear information and kept appropriately informed before, during and after point of sale.
The ratio of policy cancellations following claims, plus the ratio of policy cancellations following rejections, should also be investigated. Immediate corrective action could involve reviewing product scripts to highlight all COVER LIMITATIONS and EXCLUSIONS upfront, and to ensure that all policy documentation does the same.
Should the root cause not be found in the script or other documentation, it would be wise to implement a market conduct indicator to link policy lapses, cancellations, rejections and complaints to individual direct marketers. By establishing and reviewing conduct indicators in this manner, the business will be able to ask questions about the findings of the data and formulate a better understanding of areas of weakness or failure that lead to poor outcomes.
TCF benefits providers and consumers:
TCF Outcomes have provided financial institutions with practical tools to monitor fair consumer outcomes and to ensure customer retention and ultimately business sustainability. It is important for each financial institution to identify its own market conduct indicators, monitor these continuously and search for corrective action to address root causes.
TCF shouldn’t only be viewed as a compliance requirement but also as a business tool that uses the most relevant information to improve business practices and customer outcomes.
Webinar: Masthead can help your business achieve the TCF Outcomes
Our Treating Customers Fairly – How to Successfully Embed TCF Outcomes in your FSP webinar will give you practical guidance on how to incorporate the TCF Outcomes in your FSP and how to demonstrate this integration to the regulators, ultimately improving the experience for your clients.
This webinar will provide you with a good understanding of the six TCF Outcomes, the areas within your FSP that require TCF implementation, how to implement the outcomes, and the types of management information needed to demonstrate integration into your FSP.
Read more about the webinar here or contact your nearest Masthead Regional Office for assistance.
If you would like to arrange training specifically for your business, please contact your nearest Masthead Regional Office.