The clock is ticking and another Financial Services Authority (FSA) deadline looms.
31 March 2008 is the date that firms are expected to have appropriate management information or measures in place to test whether they are meeting the six consumer outcomes.
A sizeable number of firms failed to meet the March 2007 deadline; the point at which firms should have reached the implementation stage in a substantial part of their business.
Will firms manage to do better this time round when they have to provide hard evidence that they are ‘Treating Customers Fairly’ (TCF)?
I think there are two key areas that pose the greatest challenge in reaching the next stage.
The first is demonstrating that the culture of the firm is to treat customers fairly and the second managing the touch points between insurers and intermediaries or brokers to show that TCF is embedded in the entire product lifecycle.
An integral part of the business culture
Taking the first point, it is logical that, for the TCF initiative to be successful within an organisation, it has to become an integral part of the business culture.
There is little benefit in having good intentions at a senior level if this does not translate effectively and consistently throughout the organisation. However the challenge lies in finding objective proof of a subjective matter.
Framework
The FSA has published a framework to help firms in this task, citing examples of good and bad practice. It identifies seven cultural drivers: leadership; strategy; decision-making; controls; recruitment; training and competence; and reward.
Even with all the advice and goodwill in the world, there is no getting round the fact that management simply have to put in the time required to identify what they do, how they do it, and what existing evidence demonstrates that TCF is embedded and what evidence they may not have, but need to start collecting.
For example, a mortgage broker may reward its sales staff for the quantity of associated insurance policies they process.
However, if half of these applications are then later rejected because customers were not given the right information at the point-of-sale, then clearly their customers have not been treated fairly. So, in this situation, the TCF evidence required would have to be based on the quality of the sale as well as quantity.
It is the quality aspect that supports the cultural factor, i.e. the sales force is driven to sell products that are affordable, appropriate and of value to the customer, and not just looking to earn a quick buck from the commission.
Creating issues
This example brings me neatly on to the second area that I think will create issues for many firms in the next round of FSA assessments: the touch points between insurers and intermediaries or brokers.
In the example above, although the insurer is not responsible for the sales process, it has a responsibility for ensuring its intermediaries or brokers understand the products it develops.
What management information does the insurer have to show that it has supported this aim and what management information does the intermediary or broker have to show that their sales staff have been trained and fully understand the product?
It is essential to deliver a consistent approach so that the customer receives a seamless experience whether at the point of sale of the policy, making adjustments to their cover or at the point of claim.
The real test lies in whether insurers and intermediaries are talking to each other about this and working together to produce appropriate management information for all stages of the product lifecycle.
Are you ready?
Whether the majority of mortgage firms will be ready for the next TCF assessment remains to be seen. Being able to produce the required management information for their operations will be hard, but it will be even harder to prove that their firm’s culture supports a TCF environment and that this is an end-to-end process addressing the entire lifecycle of individual products.
