A first taste of TCF for the industry

April has ushered in not only a new tax year, but also a General Election campaign in which the future of financial services regulation is at stake.

The role of the FSA may not exactly be a headline issue as compared with, say, the NHS or immigration - but it is certain to be up for grabs if there is a change of government.

Another less heralded aspect of this month is the latest stage of the 'TCF' era, as the FSA-led concept of Treating Customers Fairly gradually acquires teeth.

As of now, for instance, 'arrow' visits will include an assessment of whether firms are doing more than paying lip service to TCF.

It's time to take TCF seriously.

In one sense, of course, TCF is nothing new - well, the concept isn't. It is a basic principle of any good business that is run with integrity - and there has long been a corpus of rules and regulations to help ensure that customers are treated fairly.

Do not, however, underestimate the significance of the FSA's initiative.

The first crucial change is that it is now explicitly the responsibility of senior management to ensure that TCF principles are ingrained throughout their organisations. Even best practice must evolve and there is a growing recognition of this across the industry.

The second change is a reliance on principles rather than over-prescriptive rules.

TCF is supposed to help firms by rebuilding consumer confidence, not by tying them down in unnecessary red tape. These principles can - and should - be applied at every level in a firm, and to any of its activities.

My view is that it will take a while for this new doctrine to bed down. In these early days, the FSA is giving the impression that the concept only concerns packaged products.

But that is only an impression. Firms are surely well advised to err on the side of caution by assuming all their activities may be subject to scrutiny.

The FSA also seems to have omitted from its TCF product lifecycle analysis the significance of claims handling to the consumer value proposition. The system, as it stands, is also oddly silent on what is termed the wholesale/retail split - what we think of as commercial and personal lines.

Accordingly too many product providers, who sell solely through intermediaries, seem to take the view that they can delegate TCF to the intermediaries.

They also need to wake up to the fact that the FSA is taking a close interest in remuneration. TCF is not yet being applied across the insurance board, but it may yet be in future.

There is a whiff of the nanny state in all of this, presumably the reason why the Conservative Party is now intimating that, if elected, it would seek to clip the wings of the FSA. Some of the issues may still seem to be up in the air as regards this still immature doctrine of TCF, but my instinct is that it's here to stay. IT

' Lord Hunt is chairman of Beachcroft Wansbroughs Consulting