Customer fairness principles critical to financial inclusion

Johan Ferreira

Similarly, pay-outs by life insurers increased by R6.3bn and claims against individual disability policies increased by 14%, while claims against employer disability cover increased by 21%.[i]

This, in turn puts a greater responsibility on insurers and other financial service providers (FSPs) to develop products that are innovative, respond to customer expectations and are marketed with integrity.

New legislation such as the Conduct of Financial Institutions (COFI) Bill and the Insurance Act have enabled a safer and more adaptable insurance market. This was achieved through introducing a legislative environment that facilitates new entrants and products into the market and also ensures that these products are authentic and customers are treated fairly.

TCF approach

“The Treating Customers Fairly (TCF) approach means that insurers must entrench the six TCF principles into the culture of their organisations. It is an outcomes-based approach to regulation in that companies must demonstrate fairness to customers through the entire product life-cycle - from the product design phase all the way through to the claims process," says Johan Ferreira, chief legal and compliance officer, Africa Unity Life.

In addition, insurers are expected to perform self-assessments to ensure that new business processes have inculcated the principles and that existing processes have been altered to include them.

Chief among these is the principle which obliges FSPs to ensure that the products and services they develop are designed to meet the needs of identified customer groups and are targeted accordingly.

“This provides an opportunity for FSPs to tailor-make products based on the specific needs of their customers, that are user-friendly and break away from the cumbersome and complex processes of the past," he says.

Ferreira stresses the importance of communicating with the customer in such a way as to ensure that advice and information is communicated clearly and takes into consideration the circumstances of the customer.

Culture of fairness

The TCF framework includes that products should perform as customers have been led to expect and that the service provided is of an acceptable standard and meets customer expectations.

“Customers should be treated with integrity, which means that products must be developed in order to provide protection and add value to their lives and the lives of their families and loved ones. This must extend to communication around the products which should be in plain language and provides a clear explanation of the product," Ferreira says.

The principle which prevents companies from imposing unreasonable post-sale barriers when changing product, switching providers, submitting claims or making a complaint is an important one, as it is an indicator of whether the company has truly inculcated the TCF principles into its business.

“Embedding these principles by adopting an attitude that enables greater financial inclusion for South Africans through developing products that are honest and agile is the key to ensuring satisfied customers and a culture of customer fairness in the organisation," he concludes.