Transcript PROTECT LEGAL AND REGULATORY REVIEW JULY 2013 Oh No!!!! The Good News . .

PROTECT
LEGAL AND REGULATORY REVIEW
JULY 2013
Oh No!!!!
The Good News . . .
 It was only 8 weeks since I got
you all nicely up to date
 So an “update” should be nice
and quick
And the Bad News?
A lot can happen in 8 weeks!
Why?
 Because FCA is on the
warpath and it has only
one thing in mind . . .
The Consumer Protection
Objective
“To secure an appropriate
degree of protection for
consumers”
FCA will: Expect you in your:-
 Product design
 Product name
 Product content
 Product marketing . .
 Even the environment in which you offer the product
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To set and then fully meet . . . .
 “consumer expectations”
“Consumer Expectations”
 These are only partly under your control
 Consumers are being encouraged on all sides to
increase their expectations
 The lives they are leading are changing rapidly, and
 The regulator expects you to change with them . .
When are those expectations tested?
Whenever the customer makes a claim
Thematic Review into Claims Handling

Announced by Martin Wheatley at the BIBA
conference on 15 May

“we are talking about enormously stressful
periods in people’s lives. Touchstone
moments”

“It would be very difficult, if not impossible,
to defend any company if it was found to be
aggravating these experiences by dragging
its heels − or trying to wriggle out of its
responsibility to pay legitimate claims. We
buy insurance for peace of mind - not for a
painful scrimmage with insurers”
What will the Review cover?
 “Themes across the general insurance market but with a
particular focus on household and travel claims”
 “We will conduct it in partnership with firms, as well as
consumers”
 “I want my team to obtain evidence directly from claimants on
how they have been treated”
What is FCA looking for?

“Does customer experience vary according to whether they bought
insurance directly, through a broker or through an affinity scheme?

How good are insurers in explaining up front what will happen when a
customer makes a claim? How well do they then keep them informed of
progress?

Are payments being made in a fair and consistent way when they are due?
Are companies acting ethically towards their customers? Is the claims
department as well resourced as the sales team?

Findings, and final recommendations, are expected by Q4 2013
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What to Expect?
 A very different approach to that from the FSA
 Much less technical – and generally less collaborative
 Simplistic demands imposed on the industry but expressed in
language addressed to consumers
 The changes demanded will appear unarguable - but may well gloss
over core commercial issues affecting your business
Why do I know this?
 Because of TR 13/2
 Published late last month
 What did it have to say?
Plenty of basic sensible stuff . . .

Product governance in firms is not “always” effective

“Aspects” of products were not designed to meet customer needs

Product terms were not “always” clear and fair to consumers

“Some examples” of poor sales practice

“In some instances” claims handling was slow and unfair

Some firms were not adhering to complaints handling rules
So - the conclusion is that there is . . .
 Some ineffectiveness, with some aspects of some products not
being well designed, and not always being clear and sometimes
being sold badly with instances of poor claims and complaints
handling
 Surely that means . . . .
There is a lot of . . . .
 effective, well designed, clear
and well sold mobile phone
insurance out there which, in
most instances, delivers to
consumers at claims stage?
 So that is good news!
Headlines
The Review addresses some fundamentals
very well . . . .
Senior
Management
Identify risk,
compliance and
cultural issues
Learning from complaints
and feedback
Operational /Product
shortcomings
Correcting operational
shortcomings
Complaints and
other feedback
Re-designing
products/services to
meet customer needs
Customers
But look at this . . . .
Is that a professional way for a regulator to
approach . . .
 a key issue facing the general insurance industry in 2013?
 How does an insurer define the risk covered, and set
consumer expectation, in a world where consumers are no
longer expected to read documentation or retain even basic
understandings?
 Put another way FCA should be addressing with the industry . .
..
Whether the traditional insurance policy is
 Fit for purpose?
Vital that . . .

Firms and PROTECT engage with FCA to
ensure that a desire to achieve “good
consumer outcomes” is undertaken
without FCA “showboating” to the
consumer lobby

There must be dialogue (not bullying) to
avoid the industry being put into
impossible positions – and ultimately
withdrawing from cover, because

If consumer expectations are constantly
and unrealistically raised the outcome can
be . . .
Disastrous – ask the . . .
Now I have that off my chest . . .
What else?
 Some more on the Consumer
Representations) Act 2012
Insurance
 Some matters European
 A bit about incentives, and
 News of more consumer rights on their way
 and . . .
(Disclosure
and
Then lunch!!!!
Consumer Insurance (Disclosure and
Representations) Act 2012
 The Act tells us that you can’t expect the consumer to tell you
things unless you ask him/her about them
 You can’t turn what you are told into a term of your insurance
 FOS have issued a Technical Note which explains FOS’s approach
following the Act (no change but useful)!
 FCA are consulting on changes to ICOBS to reflect the new law
Matters European (1)
 IMD 2 – will eventually arrive
 Lots of ticking bombs e.g. affecting claims, tying, commissions . .
.
 Damage and debris for your business will depend on matters of
a few words here and there (still to be resolved)
 Keep it well on your radar even though implementation likely to
be up to three years off
Matters European (2)
 Protection Insurance
 Conflicting movements within Europe
 Some concern to “learn from” the UK (sales experience)
 However a fundamentally different attitude to the value of
payment protection insurance . . .
 Driven by EU initiatives designed to give responsible consumers
the confidence to borrow
Incentives
 FCA have announced:-
 “further work on whether firms are now managing the risk of misselling, driven by financial incentive arrangements in place for
their staff”
 “further work” is to see if you are adhering to FG13/01 issued by FSA
in January 2013
 In that FSA reported 20 out of 22 firms assessed by FSA had features
in their (staff sales) incentive schemes that increased the risk of misselling and were therefore in breach of the Principles for Business –
and thus unlawful
What should you be doing?

Checking that: products are sold to meet the needs of consumers, not driven
predominantly by financial incentives and profits;
 you properly identify, consider (and understand) how incentive schemes
might encourage staff to mis-sell and put in place effective systems and
controls “to adequately manage the increased risks of mis-selling arising
from incentive schemes”;
 “routine monitoring” of incentive schemes is not sufficient – nor are
customer feedback surveys. You must have a full and effective risk based
monitoring which looks for problems and corrects them
 You are taking action to address any inadequacies
God help you if you don’t!
And be careful . . .
 Risks to customers from incentive
schemes may also arise in areas
such as complaints handling, claims
processing and even customer
retention
The Consumer Rights Bill
 Announced in the Queen’s Speech
 A huge consolidation of consumer protection law including bringing
the UTCCR into the new Act
 Not just a consolidation of UTCCR – but introducing Law Commission
recommendations on extending the law to cover the fairness of “core
terms”
 And that (with FCA’s agenda - and powers) is . . . .
DYNAMITE!!
So when I show you this . . .
Senior
Management
Identify risk,
compliance and
cultural issues
Learning from complaints
and feedback
Operational /Product
shortcomings
Correcting operational
shortcomings
Complaints and
other feedback
Re-designing
products/services to
meet customer needs
Customers
You not only need to think . . .
 about whether your current products are meeting (and designed
to meet) consumer need and expectations; or
 Think about the £2.8 million fine just given to PAS for failures to
analyse root causes for complaints . . .
 but also about what sort of product will meet and/or set
consumer need and expectations in the future
 Because you can be sure that this . . .
If these thoughts are valuable . .
Like many in this room . . .
You can get . . .
 These insights
 Top quality legal and regulatory commentary
 “Top up” niche legal, regulatory and compliance
support, and even
A shoulder to cry on . .
On line . .
By e-mail or
Directly from me . .
Thank You
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