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Tough questions loom as industry tackles “game changing” TCF

01 October 2012 Greg Scott, Etana

The Treating Customers Fairly (TCF) regime cannot be implemented in half measures. This “game changing” regulation demands cooperation from all industry stakeholders… At this early stage there are many important questions that still need to be answered.

The August 2012 release of the Financial Services Board’s (FSB) TCF Self-Assessment tool will assist regulated firms in determining how successful they are in achieving the TCF "fairness outcomes” and "culture framework” requirements. The tool will also assist firms in measuring and monitoring their TCF outcomes, which is one of the FSB’s expectations.

Simple doesn’t cut it

This measuring and monitoring, captured by what the FSB calls MI (management information), goes well beyond a simple numbers exercise. In broad strokes MI may consider documented activity of each customer contact before, during, and after the point of sale – the service experience of each customer – and the overall level of staff training on TCF outcomes.
 
The reporting requirements will undoubtedly present challenges. One area of concern is how to determine which measurements the FSB expects for each TCF outcome.

How to measure outcomes

The Self-Assessment tool belongs to the MI category. Although it is not compulsory to complete this tool it does help firms with their on-going TCF monitoring and assessment processes.

The tool consists of a series of questions that target a broad cross section of business processes. Your firm can gauge its level of fair customer treatment by completing these questions and referring to the calculated TCF-readiness score for each of the six outcomes.

Answering tough questions

The rating scale used to complete the Self-Assessment appears to be simple enough, but some tough questions emerge around the delineation of the roles and responsibilities of the product supplier (insurer) and the intermediary (broker) within the realm of TCF.

This includes whether or not firms can adequately explain to the FSB why a certain process is relevant or indeed applicable within the TCF framework. At first glance this plays right into the hands of the direct insurers who routinely highlight the inefficiencies of the broker distribution model.

Leave the middle man alone

The constant bashing of the so-called "middle man” has resulted in hordes of insurers clamouring and leveraging for the top spot as the broker’s best friend. This is often little more than lip-service by traditional insurers who for the most part have created direct lines of their own.

The TCF Self-Assessment tool muddies the water further by adding to an already complex mix of regulation on the one hand and insurers jockeying for market share on the other. Some of the measurement statements clearly highlight the delineation of responsibilities between brokers and insurers while others do nothing but stir debate.

Seeking clarity

The South African Insurance Association (SAIA) is working on a guideline to define the respective roles of broker and insurer. Once completed questions regarding who, how, when, where, and at what cost – as they relate to the application of TCF – need not be a thorn in a side of either party.

This exercise is an opportunity for brokers and traditional insurers to reaffirm their commitment to the retail market as well as reform their current information sharing processes to promote efficiency. It is hoped that brokers and insurers can iron out inefficiencies and focus on information sharing in an effort to enhance their respective TCF scores and consequently their customer service and fairness levels.

Following the higher law

There are a number of issues that need to be addressed. Top among these are the likely conflicts between TCF, competition laws and legislation on the sharing of personal information. For example: At what point does information sharing become anti-competitive? And what impact will the Protection of Personal Information Bill have on the ability of insurers and brokers to fulfil certain implicit TCF requirements?

Insurers and brokers are going to have to work together to adequately prepare for – and answer – some tough questions as they progress toward TCF.

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