Is TCF serving its purpose?


The purpose of regulatory reform is to establish a set of rules and guidelines within an industry that will determine how business is done within that industry.


Treating Customers Fairly (TCF) is a key document that regulates the industry. If insurers and brokers adhere to these outcomes, the client will receive the best outcomes from interactions with insurers or brokers. 


Are all companies coping with the objectives set out by TCF? We spoke to Odette de Beer, Manager: Group Customer Conduct at Hollard, to find out the company's views on TCF and its impact on the industry. 


An effective referee


Many insurers and brokers asked if the industry really needed TCF; however, it was implemented. Is it an effective way to regulate the industry? 


"The aim of TCF is to get organisations to think about the customer before they do anything, and that is certainly a noble cause that will lead to greater sustainability. But it also requires a major change in the mindset and culture within most insurers. Such change is not easy, and legislation can provide the big stick that sometimes needs to be wielded to drive such fundamental change. I do think some form of regulation is necessary; however, unless such legislation is very carefully crafted, it can also lead to less desirable outcomes," said De Beer.  


She added that by adopting an outcomes-based approach, TCF cleverly avoids the potential pitfalls of undesirable outcomes by creating a framework for the delivery of better outcomes for insurance customers. This approach demands that insurers take responsibility for understanding the impact of their actions and compliance efforts on the customer. 


“Where the outcomes of these efforts are not aligned with requirements, insurers are forced to find a better way. This seems to me to be a very effective way of regulating insurer behaviour," said De Beer. 


Clear lines


The TCF outcomes were adopted by similar outcomes set down in the UK. In both cases, the regulators said that TCF would be effective because it sets down clear guidelines when it comes to proper conduct. However, is this the case? 


“All legislation comes with a requirement to interpret certain words, phrases and constructs. Pure rule setting can be ineffective and lead to a lot of unconstructive behaviour; however, the outcomes-based approach of TCF means that all that really matters is the outcome of an insurer’s actions. And the standards provided by the Financial Sector Conduct Authority (FSCA) are clear enough to provide direction for insurers. If insurers continuously assess their actions in terms of the outcome for the customer, then I believe things are crystal clear and there are no blurred lines,” said De Beer. 


But are all insurers coping with the TCF outcomes? 


“There may well be insurers that will struggle with implementing TCF. Compliance in the past has often been cumbersome and expensive, and I don’t think that TCF is any different in that respect. Further, these costs arise in a very tough economic environment, so we will quite possibly see trade-offs being made between full compliance and shareholder demands. What is most important however is that we as insurers recognise that our businesses and customer needs are constantly evolving and TCF needs to be about a journey of continuous improvement for our customers in terms of the products and services we offer,” said De Beer. 


Tailor made?


The problem with implementing a piece of legislation that will govern the whole industry is that the South African insurance industry is very diverse. Different insurers have challenges that they face, and TCF cannot add to these challenges.


Does TCF suit larger or smaller insurers? 


“TCF affects all insurers, big and small. It’s no exaggeration to say that it has to become a way of life for all insurers. In fact, larger companies may have an advantage in that the costs of compliance can be spread across more policies. Larger companies are also more likely to have the human resources necessary to drive and prove compliance, something which requires dynamic individuals who are able to look at TCF requirements, assess business risks, and identify actions which result in good outcomes for the customer,” said De Beer. 


How do larger companies, that have huge books of business, effectively comply with the TCF outcomes? 

“TCF needs to be embraced within the culture of an organisation to ensure effective compliance. Employees need to be able to understand exactly how everything they do affects customers, they need to be able to see things from the customer’s point of view, and they need to remember that policyholders are humans, not just numbers. Of course, strategy and operational adjustments also have to be made, but it all starts with culture,” said De Beer. 


She added that larger companies also need to remember that TCF is a journey, not an event. Continuous course correction over time, rather than a dramatic turnabout, is the approach that will most likely lead to the desired outcome. 


Editor’s Thoughts:

While TCF reinforces this mantra within the industry, we need to ask if there are any unintended consequences that have crept into the industry during its implementation. Is TCF an effective way to regulate the industry? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts


Article published courtesy of FANews



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