Rachael Rigby says the way the Treating Customers Fairly principles are used can improve customer service and drive business improvements

How companies react to customers’ complaints and feedback is what makes the difference between mediocre organisations and

market leaders. Delivering in accordance with the FSA’s best practice guidelines under the Treating Customers Fairly (TCF) scheme is a challenge for the insurance industry, but it should also be a sound mechanism for insurers to ensure that they retain customers and deliver better service.

The insurance industry of 2007 operates under what a management consultant might call a “disaggregated value chain” or, in translation, “lots of different companies fulfil lots of different functions”.

Insurers, brokers, loss adjusters and claims management companies are just a few of the business entities that might be involved in a single insurance transaction with a customer.

But for the customer, these multiple entities are either invisible or unimportant – they purchased their insurance from a brand they trusted and they expect that brand to deliver in a certain way.

Brand integrity

As such, insurers and brokers that are committed to dealing with customer complaints under TCF principles will need to review, monitor and manage their third party suppliers to ensure service quality and brand integrity across the entire operation.

The best in-house operation in the world can be compromised by a single poor-quality supplier, especially if that supplier interacts with the customer at any point.

The FSA’s TCF initiative breaks new ground. By establishing principles, rather than rules, it calls for cultural evidence of change, not just compliant processes and systems.

TCF is not just a concept for today – it’s about the way that business is conducted on an ongoing basis – but the FSA announcement regarding slow take-up of TCF principles among brokers, particularly, suggests that brokers and insurers are finding it hard to achieve.

They cite increasing customer expectations, a lack of senior management ‘buy in’ and inconsistency across the organisation as the key barriers.

The challenge for firms is to show that they have undertaken the TCF ‘cultural revolution’ remains a major consideration in all key decision-making that affects customers and that it is implicit in all key business processes.

According to the FSA: “Identifying appropriate management information (MI) continues to be a challenge for many firms and is often one of the last elements of TCF to be addressed.”

The outcome of not being treated fairly will be a complaint – or worse, a lost customer

Indeed a robust process for MI reporting is essentia. Some approaches to MI miss the point by focusing on the ‘one big question’ (do we treat you fairly?), or relying wholly on operational measures.

Strong MI reporting enables an insurer to consolidate and analyse complaints and feedback to identify the root causes of complaints and customer dissatisfaction. By effectively analysing root cause data, enabled by quick and easy classification of the customer’s issues, feedback and complaints, the insurer can leverage MI to make informed decisions on identifying customer requirements, enhancing product design and improving service delivery.

This in turn means insurers are able to identify underlying causes of complaints – ( Is the claims process working efficiently? Are complaints being handled swiftly enough? Is our contact centre working correctly?) – and adopt preventative measures to reduce the chance of a complaint before it occurs.

As these processes and ways of working become familiar and a natural part of day-to-day practice within the insurer’s business, they can be used to promote a culture of continuous improvement in service quality. They can also ensure that specific customer needs are identified and accounted for and, effectively using root cause analysis and of TCF best practice when the insurer reports back to the FSA.

The ongoing task for any insurer and major broker must be to apply best practice and embed TCF principles into its complaint management processes and normal day-to-day business activities.

As TCF principles are embedded in the business, the insurer can provide evidence

of a culture of fair treatment. The fact that customers’ complaints are handled in line with regulatory initiatives, and that the insurer demonstrates its commitment to promoting a culture of continuous service and quality improvement.

In order to achieve this, in effect, the insurer needs to extend the customer service function to all areas of the business operations to provide a consistent approach to complaint management and service delivery.

Attempting to commit to TCF principles across the organisation will increase the capacity of the entire business to capture complaints and feedback at the first point of contact, and ensures that the complaint is handled according to the FSA’s case studies on best practice.

Under TCF, there will always be more work to be done. Firms will need to keep reviewing processes to ensure that they are fair – how it is working and what is the outcome of that project or process.

Software can help with this – and indeed, it can also help to set performance measures that reward staff that treat customers fairly as well as identify when things do go wrong. The outcome of not being treated fairly will be a complaint – or, worse, a lost customer.

TCF will remain a challenge for insurers and brokers. Principles-based regulation naturally provides a much more varied and inconsistent challenge for firms to deal with.

In the critical area of customer complaints, it is only through continually striving for and embedding TCF principles throughout customer service that insurers and brokers can be confident of meeting the challenge laid down by the FSA.