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PROTECT. LEGAL AND REGULATORY REVIEW JULY 2013. Oh No!!!!. Lunch 1.30. 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. Lunch 1.30. And the Bad News?. A lot can happen in 8 weeks!. Why?.

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protect

PROTECT

LEGAL AND REGULATORY REVIEW

JULY 2013

oh no
Oh No!!!!

Lunch 1.30

the good news
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

Lunch 1.30

slide6
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
FCA will:-
  • Expect you in your:-
    • Product design
    • Product name
    • Product content
    • Product marketing . .
    • Even the environment in which you offer the product

(c) Paginator Limited 2013

to set and then fully meet
To set and then fully meet . . . .
  • “consumer expectations”
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 . .
thematic review into claims handling
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
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
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

(c) Paginator Limited 2013

what to expect
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
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
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
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
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!
the review addresses some fundamentals very well
The Review addresses some fundamentals very well . . . .

Senior Management

Identify risk, compliance and cultural issues

Learning from complaints and feedback

Correcting operational shortcomings

Operational /Product shortcomings

Complaints and other feedback

Re-designing products/services to meet customer needs

Customers

is that a professional way for a regulator to approach
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 . . . .
vital that
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 . . .
what else
What else?
  • Some more on the Consumer Insurance (Disclosure and Representations) Act 2012
  • Some matters European
  • A bit about incentives, and
  • News of more consumer rights on their way
  • and . . .
consumer insurance disclosure and representations act 2012
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
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
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
Incentives
  • FCA have announced:-
    • “further work on whether firms are now managing the risk of mis-selling, 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 mis-selling and were therefore in breach of the Principles for Business – and thus unlawful
what should you be doing
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
and be careful
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
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 . . . .
so when i show you this
So when I show you this . . .

Senior Management

Identify risk, compliance and cultural issues

Learning from complaints and feedback

Correcting operational shortcomings

Operational /Product shortcomings

Complaints and other feedback

Re-designing products/services to meet customer needs

Customers

you not only need to think
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 . . .
you can get
You can get . . .
  • These insights
  • Top quality legal and regulatory commentary
  • “Top up” niche legal, regulatory and compliance support, and even
thank you
Thank You

www.paginator.co.uk

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