Posted: 10th April 2014
In its first year of regulation, the Financial Conduct Authority (FCA) has been constant in its search for good customer outcomes. When we asked firms, however, 64% said they did not think this phrase is fully understood.
The Firm Systematic Framework, Business Model and Stategy Analysis, deep dives, senior manager attestation, thematic reviews, and enforcement fines all demonstrate the FCA’s proactive and intrusive approach. They put conduct risk right at the top of a firm’s risk agenda.
If your conduct strategy does not meet FCA expectations or you are unable to evidence the outcomes you achieve for customers, you risk being labelled as an “outlier” firm and exposing your business to FCA scrutiny.
What is coming for GI firms?
All GI firms should be aware of what’s coming down the track and act early. Of all the GI focussed thematics, two will hit a significant proportion of firms’ operations and are inextricably linked:
1) Complaints thematic
2) Thematic review on personal lines claims
These are, both due for publication in the next few months.
Martin Wheatley said when announcing the Personal Lines Claims Thematic back in May 2013: “We know complaints about insurance products are on the rise. We know these complaints are more likely to be upheld in favour of the customer than ever before. And, significantly, we know the large majority of these complaints – 64% according to Which? – are directly related to claims. I think it is right to dig deeper into figures like these. I think it is right to address public concerns that imply policy holders might be facing delays; poor customer service; or having perfectly valid claims unfairly declined.
Align your thinking to the customer
With £30.6 billion paid in claims every year, insurers are constantly examining their claims processes. But is this examination from the perspective of whether fair customer outcomes have been delivered?
There is a lot of good work on fraud, claims leakage, policy wordings and reserving cost efficiencies via outsourcers. However, less is done from the perspective of the customer, who has paid a premium in return for a promise which they expect to be delivered.
Firms are beginning to talk about the number of customer touch points. But is this to benefit the customer or to save costs? Complaints root cause analysis is becoming a popular phrase but how effective is it? Some firms are including feedback to claims departments in their written root cause analysis processes and governance frameworks but they are not going far enough to ensure the analysis is acted on and deliver measurable customer benefit.
There is lots of positive and encouraging talk, but firms are less likely to take time to really examine and map their end-to-end customer claims journey, deciding what good looks like at each stage of that journey, from first claims notification through to decision and settlement.
How many firms are making sure that the tone from the top, claims and complaints processes, and their staff behaviours really deliver on that commitment? Use of qualitative as well as quantitative management information to track that customers are getting those fair claims outcomes is sparse. Boards and Risk Committees are not yet challenging the management information they receive to drive improved customer outcomes.
Evidence of firms using both their reportable and non-reportable complaints data to properly analyse the true root causes of complaints, not just the symptoms, is rare. Few are checking that their complaints root cause analysis is actually being acted on by their claims departments, and reducing complaints.
The FCA expects all firms to start thinking in these terms, to be reviewing claims and complaints approaches from a customer perspective, to be committed to delivering fair outcomes and to be ready to demonstrate those outcomes, not just as a one off, but as an embedded and natural part of an effective business model. Are you ready?