TCF: a practical perspective

This is according to Adél Walker, Legal & Compliance Officer at Compass Insurance, the specialist South African short-term insurer, operating exclusively through Underwriting Management Agencies (UMAs). Walker, who is deeply involved in her company’s roll out of the principles of TFC by its 1 January 2014 due date, clarifies, "It will, quite clearly, take time for a company to make sure that it complies with the new rules. You need to have a policy, a plan and a strategy in line with the principles of TCF, and your plan should revolve around the six outcomes of Treating Customers Fairly.”

The desired outcome of TCF is to ensure that all financial entities regulated by the Financial Services Board (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.

"How the model works must not be to the detriment of the policyholder,” says Walker. "Everyone is accountable and structure should not affect the issue of Treating Customers Fairly – as the insurer you need to take full accountability. At Compass Insurance, we take the customers’ rights seriously and through planning, strategy and policy we are rolling out the issue of TCF from the Board all the way through to our UMAs, whom we are assisting to be TCF-ready.”

Walker says the six TCF outcomes help to break down the Treating Customers Fairly principles into different stand-alone areas which, while all interlinked by having the customer at the heart of processes and products, allow working practicalities to be more easily dealt with in specific sections. The outcomes include:

• Outcome 1: Culture & Governance - The fair treatment of customers must be central to the firm culture (in TCF language, the term ‘firm’ is broadly used to include any regulated financial institution or entity).

• Outcome 2: Product Suitability - Products and services marketed and sold in the retail market must be designed to meet the needs of identified customer groups and targeted accordingly.

• Outcome 3: Disclosure - Customers must be given clear information and kept appropriately informed before, during and after the time of contracting.

• Outcome 4: Suitable Advice – Advice given to customers must be suitable and take account of their circumstances.

• Outcome 5: Performance and Service against expectations - Customers must be provided with products that perform as firms have led them to expect, and the associated service must be both of an acceptable standard and what they have been led to expect.

 

• Outcome 6: Claims, Complaints & Changes - Customers must not face unreasonable post-sale barriers to change product, switch provider, submit a claim or make a complaint.

In this regard, says Walker, Compass has made good use of a TCF self-assessment tool that the Financial Services Board (FSB) has provided to enable companies to assess their TCF readiness www.fsb.co.za. "We encourage the use of this very useful FSB tool, based on a number of key questions under each of the six TCF Outcomes, which we ourselves have completed and found to be extremely practical and helpful. The tool has enabled us to view our scores under each of the six Outcomes, as well as seeing our combined readiness score. We have been able to identify the shortfalls in our current TCF processes and controls, and continue moving forward.”

Walker says the TCF assessment tool gave Compass a good indication that TCF Principles and Outcomes are already implicit in what the company does, and that in some areas TCF is being consistently applied. "The scores also showed us where we needed to improve our controls, our ongoing monitoring and our use of management information (MI) to fully embed TCF in our business. The information and key deliverables formulated the first of many steps in ensuring that we deliver the right TCF standard in our organisation.

 

"We are also liaising with our UMA binder holders, who are also required to work through this self-assessment tool – the success of TCF lies in a collaborative effort between Compass Insurance and its UMA binder holders.”

Other steps taken by the company include:

• Contacting Compass Insurance’s sister company in the UK, Inter Hannover, to apply global lessons locally.

 

• Sharing detailed communication - with Compass Insurance employees and UMA stakeholders on policies, strategies and implementation plans.

• Providing training to Compass Insurance employees.

 

• Providing training to the UMAs, including one-on-one training where required.

• Hosting TCF workshops.

• Attending portfolio meetings and discussing legal ramifications.

"The issue of ‘treating customers fairly’ is not a new concept, but its implementation is useful in that it has enabled us to relook at how we treat our customers. Compass and its underwriting management agencies have always put our customers first and it is now imperative to demonstrate how TCF is applied at all levels,” Walker concludes.