Market conduct regulation of complaints management in the insurance industry

Abstract

Since 2012, the financial sector regulators have been engaging with the industry on the regulatory framework, specifically the policyholder protection rules (PPR) and Treating Customers Fairly (TCF) approach. The purpose of the adoption of these principles is to ensure the fair treatment of customers. The approach seeks to ensure fair outcomes to customers within the financial services sector and to ensure that the sector is adequately regulated at all stages in the relationship between the institution and its customers. During these engagements, it became clear that the current financial services regulatory framework in relation to complaints management was deficient. The purpose of the proposed changes to the complaints management framework was to effect a more consistent and comprehensive regulatory framework to support the delivery of the specific outcomes envisaged for complaints management across different types of financial institutions. In order to develop proposals, the Financial Services Board carried out a thematic review of complaints handling practices from April to June 2014. The findings arising out of the thematic review were aimed at encouraging insurers to assess the effectiveness of their complaints management processes and, where necessary, effect improvements to, or enhance, their complaints handling methodologies. There is a need to unpack complaints management in the insurance industry and to research possible improvements on deliverables relating to market conduct. Complaints management is a core component of market conduct-related behaviour and regulation. The dissertation evaluates the South African system against foreign jurisdictions’ frameworks for complaints management and international best practices in order to show the need for improvement and make suitable recommendations. Against this background, the dissertation considers the following research questions: 1. What is the current regulatory framework in South Africa that governs complaints management? 2. How does the South African insurance industry deal with the recent regulatory changes, specific to complaints management? 3. What are the challenges that exist within the current complaints management framework in its state of implementation, and will future law change these practices? ii 4. What are the practices endorsed by the regulators in respect of complaints management in South Africa and other countries, specifically the UK and are there international best practices that exist in this regard? 5. How can the South African insurance industry align with national and international best practices relating to complaints management and in terms of regulatory changes within the complaints management framework? The research finds that there are still many questions and concerns relating to complaints management. Amongst other findings, there is a need for greater engagement between the industry and the Regulator, an exercise of education for not just the financial services customer, but for the financial services institution, as well. The need for standardization and consistency was a requirement which was much needed. Whilst it is noted that there is a separate market conduct regulator, it is clear that there should be effective coordination to ensure a sustainable model in future. The research seems to have raised a number of unanswered questions – not all of which fall within the ambit of legal scholarship (such as the cost-impact of the regulatory changes to complaints managements). A number of areas were identified as key areas of concern within complaints management which will require constant monitoring, review and research in order to ensure that complaints management complement market conduct outcomes as envisaged.