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Management must lead by example with treating customers fairly

20 September 2012 Ad?l Walker, Legal & Compliance Officer at Compass Insurance
Ad?l Walker, Legal & Compliance Officer at Compass Insurance

Ad?l Walker, Legal & Compliance Officer at Compass Insurance

The senior management of South Africa’s short term insurance companies need to ensure they prioritise the forthcoming implementation of the Financial Services Board’s (FSB) Treating Customers Fairly (TCF) initiative as a positive development, not an admin

This is according to Adél Walker, Legal & Compliance Officer at Compass Insurance, who says some role players in the industry have lamented the fact that boards of directors should not be bogged down with operational technicalities, such as the implementation and measurement of TCF.

“The board sets the strategic direction of the company and must therefore not only embrace TCF, but ensure that such principles are embedded in the fabric of its business practices. Whilst the onus is on the role players within the company to implement and map out the various TCF requirements and measurements, the board of directors should actively monitor, evaluate and provide guidance on the effectiveness of the measures implemented.”

She notes that any companies that have thus far neglected to engage with its directors on TCF will not be prepared in time. “Companies in the financial services industry who fail to embrace and implement the TCF principles will, quite simply, be left behind. Customers want to be treated with integrity by financial firms who understand their needs and who are both transparent and accountable. Firms who embrace this discipline will in due course surpass their competitors who fail to demonstrate TCF principles.”

Walker says the prevailing image so far in the market regarding TCF seems to focus on the general failure of insurance companies to incorporate these principles into their business practices. “It has been said that some insurance companies and intermediaries are stuck in a compliance-based, tick-box approach only and in doing so, have lost sight of the focus to treat customers fairly.”

“Unfortunately, this is true in too many instances. In spite of a wave of legislative measures to protect the consumer, the basic principles of fairness may not be applied consistently in the insurance industry. For example, in some cases, the insured’s premium will only be reviewed and reduced accordingly if the insured complains loudly enough and to the right person within the company.”

“If implemented and enforced correctly, TCF will have a far reaching impact on the insurance industry by ensuring that transgressors are brought to book, but simultaneously recognising the financial companies who have already embedded a culture of fairness, transparency and accountability.”

Walker notes that the desired outcome of TCF is to ensure that all financial entities regulated by the FSB adopt a culture of fair and equitable treatment of their customers at all stages of the product life-cycle from the broker who renders an intermediary service right through to the underwriting manager and the insurer.

“TCF is a hugely important, and positive, development for the insurance and wider financial services industry in South Africa. However, for it to work optimally it is crucial that companies implement the principles from the top down to ensure that all staff embrace them,” concludes Walker.

Quick Polls

QUESTION

As National Treasury mulls a two-bucket retirement system, mandatory contributions and preservation, regulation 28 is being amended to allow up to 40% of retirement fund assets to be invested in SA-based infrastructure… Which of the following retirement fund ‘tweaks’ would you consider most beneficial to your clients?

ANSWER

Give fund members emergency access to retirement savings
Let fund members invest 40% in infrastructure
Let fund members invest 40% offshore
Mandatory preservation when resigning from a fund
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