TCF from a UMA Perspective - Associated Compliance€¦ · TCF from a UMA Perspective. To...

Presented by Cornea Matthee

Centriq Group Risk and Compliance Officer

TCF from a UMA Perspective

To understand the role and responsibilities of the

Underwriting Management Agent

from a TCF point of view.

What to Expect?

Who is Centriq?

Cell Captive Licences

100% SantamCentriq Insurance

Holdings Ltd

Centriq Insurance Company Ltd

Centriq Life Insurance

Company Ltd

Nova Risk

Partners Ltd

• Cell Captive – a contractually ring-fenced structure created within the one legal entity. “Mini-insurance licence”

• In exchange for capital, cell owner issued preference shares which entitles cell owner to profits/losses of insurance businesswritten into the cell captive.

• The cell pays Centriq a licence or management fee in exchange for use of licence and services provided. Centriq mayparticipate in insurance profits/losses through reinsurance agreements with cells.

What Centriq does . . .

Solutions

Risk Finance • First Party/Self Insurance Solutions housed in a Cell Captive, Contingency or Finite Risk policy

Affinity • Third Party Insurance Solutions provided to companies or groups where insurance business is ancillary to the primary business. Solutions generally housed in a Cell Captive structure.

UMA Solutions • Third Party Insurance Solutions provided to Underwriting Management Agencies that offer insurance to client base through the traditional intermediated market. Solutions housed in a Cell Captive or Promoter Account.

Financial Highlights

2015 2014 2013

2,51bn 2,24bn 2,46bn GWP

58.1% 55.5% 54.9% Solvency Ratio

AA- (2014) AA- A+ GCR Claims Paying ability

THEME OUTCOME EXPLANATION RISK APPETITE STATEMENT

1 Culture & Governance

Customers are confident that they are dealing with

firms where the fair treatment of customers is central

to the firm culture.

We must establish and maintain a corporate culture

where the fair treatment of customers is a key

consideration.

2Product Design and

Marketing

Products and services marketed and sold in the retail

market are designed to meet the needs of identified

customer groups and are targeted accordingly.

The products and services marketed and sold (in the

retail market) must be designed to meet the needs of

identified customer groups and be targeted accordingly.

3

Customer

Communication and

Disclosure

Customers are given clear information and are kept

appropriately informed before, during and after the

time of contracting.

Customers must be given clear information and be kept



4 Suitable AdviceWhere customers receive advice, the advice is

suitable and takes account of their circumstances.

Where customers receive advice, it must be suitable

and takes account of their circumstance.

5

Performance and

Services against

expectation

Customers are provided with products that perform

as firms have led them to expect, and the associated

service is both of an acceptable standard and what

they have been led to expect.

The products provided to customers must perform as

they are intended to, and the associated service

provided must be of an acceptable standard consistent

with our promise to the customers.

6 Claims, Complaints and

Product ChangesCustomers do not face unreasonable post-sale

barriers to change product, switch provider, submit a

claim or make a complaint.

We will not impose unreasonable or unfair post-sale

barriers to prevent customers from changing their

product, switching provider, submitting a claim(s) or

make a complaint(s).

TCF Themes & Outcomes & Risk Appetite

THEME OUTCOME EXPLANATION RISK APPETITE STATEMENT

1 Culture & Governance

Customers are confident that they are dealing with

firms where the fair treatment of customers is central

to the firm culture.

We must establish and maintain a corporate culture

where the fair treatment of customers is a key

consideration.

2Product Design and

Marketing

Products and services marketed and sold in the retail

market are designed to meet the needs of identified

customer groups and are targeted accordingly.

The products and services marketed and sold (in the

retail market) must be designed to meet the needs of

identified customer groups and be targeted accordingly.

3

Customer

Communication and

Disclosure

Customers are given clear information and are kept



Customers must be given clear information and be kept



4 Suitable AdviceWhere customers receive advice, the advice is

suitable and takes account of their circumstances.

Where customers receive advice, it must be suitable

and takes account of their circumstance.

5

Performance and

Services against

expectation

Customers are provided with products that perform

as firms have led them to expect, and the associated

service is both of an acceptable standard and what

they have been led to expect.

The products provided to customers must perform as

they are intended to, and the associated service

provided must be of an acceptable standard consistent

with our promise to the customers.

6 Claims, Complaints and

Product ChangesCustomers do not face unreasonable post-sale

barriers to change product, switch provider, submit a

claim or make a complaint.

We will not impose unreasonable or unfair post-sale

barriers to prevent customers from changing their

product, switching provider, submitting a claim(s) or

make a complaint(s).

TCF Outcomes & Risk Appetite

TCF POLICY (TCF Broker Declaration)

TCF MANAGEMENT INFORMATION (MI) POLICY(Risk Appetite Statements)

1. TCF Objectives & Risk Appetite Statements

Translate the corporate strategy into targeted TCF outcomes and explicit

statements of TCF risk

2. Business MeasuresQuantitative and qualitative metrics

that can be used to articulate the objectives and risk appetite statements

3. Tolerance / Limit FrameworkDetermine the limits or thresholds

against the measures

6. GovernanceState the roles & responsibilities of

individuals charged with delivering TCF outcomes and risk appetite

4. Monitoring & reporting5. Management & decision making

TCF MI Framework (Proposed steps)

Board

TCF Declaration, Risk Appetite and MI Dashboard

TCF MI and Risk Governance Structure

Risk Management System

Alignment, “check”, Oversight

Direction, overall policy and standard setting. Key activities include:• Designs and deploy the overall TCF

and TCF and MI policy• Develop and monitor policies and

procedures• Monitors adherence to policy,

standards, strategy and risk appetite statements

2nd LineIntegration, Oversight, Risk Control

& Monitoring

Compliance & Risk Management

Independent “Check”

Independent & objective assurance over the effectiveness of TCF standards & business compliance

Assurance that the risk management process is functioning as designed & identifies improvement opportunities

3rd LineIndependent Assurance & Validation

External ComplianceExternal Audit

Managing and Decision Making

Embedding of TCF into business in line with TCF Policy & Risk Appetite:• Translate risk appetite and make business

specific• Apply TCF outcomes and appetite to

relevant business activities• Identify measures / metrics to test extend

of delivering TCF• Monitor, manage and report performance

against TCF outcomes and risk appetite• Remediation / Improvement

1st LineTCF Ownership

Management Meetings

TCF Governance & Reporting (Proposed Structure)

How

adv

erse

ly a

re c

usto

mer

s af

fect

ed

(Lik

elih

ood

that

cus

tom

ers

will

be

affe

cted

)?

Low Medium High

Very Likely 2 3 3

Likely 1 2 3

Unlikely 1 1 2

1-10% Minor 10,1-50% Moderate 50,1 - 100% Major

Impact / Seriousness (How many customers are affected per product?)

Risk Quantification (Rating)

Insurer UMA Binder

Holder

Sign-off (tariffs, wordings)ApproveMeetings

Audits

Develop ProductUnderwrite

Train BrokersMarket ProductCollect PremiumAdmin Product

1. Queries2. Claims3. Complaints4. Compliments5. Feedback6. Cancellations

DATA7. Claims/loss ratio8. Lapse ratio9. Sales Average10. Complaints11. Cancellations

UMA BINDER FUNCTIONS12. Determine – wording13. Determine – pricing14. Determine – benefits15. Enter into, vary, renew

(cancel and refuse to renew a policy & declare a policy void)

16. Settle & Reject Claims

REQUIRES15. Broker Product Training 16. Staff Training (Claims, Complaints, Rejections,

Cancellations, Customer Care)17. Segmentation (Understand & know customer)18. Sophistication determines “simple & plain” language19. Weekly & Monthly (meetings, Reporting)20. Sales Process, Premium Collection

TCF BAU• Root Cause Analysis• Investigations• Meetings• Performance Review & Remuneration• Remedial Action:

Train, Retrain, Performance Manage, Disciplinary Action, Audit, Terminate, Enhance, Change, Discontinue

• Reporting and Escalation • Monitoring

CustomerBroker

Sell ProductAdvice

Market ProductCollect Premium

MeetingsAct obo Client

What does the UMA Binder Holder do?

Product & Service Design

Promotion & Marketing

Advice Point of SaleInformation

after point of sale

Complaints and claims handling

2 2, 3 2, 3, 4 3, 5 3, 5 5, 6

CULTURE & GOVERNANCE (outcome 1)OU

TCO

MES

Product Life Cycle

Linking TCF to Operations / Functional Areas

Product & Service Design

Promotion & Marketing

Advice Point of SaleInformation

after point of sale

Complaints and claims handling

Marketing, Sales, Claims, Complaints

Brochure, SMS, Website, Flyer,

Letters

Sales, Retentions,

Customer Care, Training

Sales, Scripts, Quality

Assurance

Welcome Letter, Policy,

Disclosure, Schedule, SMS

Website, Ongoing

Communication

MI d

ash

bo

ard

Distribution Value Chain

CULTURE & GOVERNANCE

HUMAN CAPITAL, COMMUNICATION, 3RD PARTIES

Primary Department & Evidence

UnderwritingTCF Product Governance Policy

TCF Product RegisterTCF Sign-Off Sheet

Remedial Action Register

Outcome 2, 3

TCF Committee

Remedial Legal BreachAction Register Letter

Outcome 1

Claims / ComplaintsClaims Policy

Complaints PolicyIncident Register

Root Cause Analyses & FeedbackRemedial Action Register

Outcome 4, 5, 6

Business (Partner/Broker Management)TCF MI DashboardBroker MeetingsInsurer Meetings

Take-On (Due diligence) of broker – TCF

TCF Broker Declaration

SOPsCompliance Policy

TCF PolicyMI Policy

Supporting PoliciesMeeting Minutes

TrainingReporting

ComplianceAudit Report – TCF Remedial Action

Checklist in place – TrackingRemedial Action Register

Ongoing Monitoring

Outcome 1

TCF Responsibilities – UMA view

Company Directors TCF Policy MI Policy & DashboardClaims & Complaints specific Claims Policy Complaints-Handling Policy Incident Register Claims & Complaints Remedial Action Register ReportingUnderwriting specific Underwriting Policy (incl. PPR Checklist) Underwriting TCF Product Governance Policy Product Register & Risk Rating (target market description / write up) Sign-off Sheet Underwriting Remedial Action Register ReportingBusiness specific SOPs (incl. DD) TCF Broker Declaration TCF Business Monitoring Tool Meeting Agenda and MinutesReports Exco / management meeting report Compliance monitoring and audit reports TCF status report

CO

NTR

OLS

/ D

OC

UM

ENTS

TCF Evidencing

TCF Outcomes MI Required

Outcome 1:Culture & Governance

TCF framework, policy, charter, constitution, declaration, policies and procedures aligned

TCF included in measuring performance (KRA, KPI, KPA)

Staff awareness training / refresher training (staff / brokers)

No. of staff receiving Coaching / Retraining following complaints / TCF breach

No. of remedial / mitigating actions implemented / taken

No. of staff receiving Coaching / Retraining following complaints / TCF breach

TCF Forum / Committee / Champion / Representative

Meeting Minutes / Board and Sub-Committee Minutes (Manco, Exco, Team meetings)

Outcome 2:Product Design & Marketing

Market Segmentation done and operates in intended market segment profile

Research done - Number of focus groups held before product is launched and summary of research results

All generated marketing and customer communication is designed for itsintended target market and is easy to understandProducts advertised and promoted in line with TCF

Plain language implementation - % of customer communication adjusted for plain language

Number of compliance breaches picked up by the in-house approval process

Volume of complaints by promotion type (advertisement, Direct Marketing (telephone, Internet, media insert, direct mail or electronic mail), brokers,etc.)

Complaints feedback - Complaints stats relating to product/product features/bundles/charges/ premiums/add-ons and loyalty benefits

TCF MI (outcome 1 & 2)


Outcome 3:Communication & Disclosure

Provides the customer with all the information needed to make an informed purchasing decision (e.g. Disclosure document, Restrictions and exclusions, etc)Number of policies issued, by type of sales channel (via call centre, internet, agreggators, lead generators, face to face, etc)

Gross premium written for all new policies and not taken up by type of sales channel (via call centre, internet, agreggators, lead generators, face to face, etc)

Up to date client contact details - Number of clients with address unknown as % of client base and undelivered communication expressed as % of total communication sent

Complaints relating to broker information supplied / relating to quality of information provided to customers, including advertising, service letters and other disclosures/communication

Percentage of clients contacted following completion of satisfaction survey

Outcome 4:Suitable Advice

Percentage of sales staff completing new product training within a given periodApplication form completed by customer in line with TCF

Recordkeeping of Advice that is provided

Advice monitoring - % of cases monitored for advice,

% of clients from monitored sample that received inappropriate advice and mitigating action taken

Outcome 5:Performance & Services

against Expectations (recording and analysing data / stats)

Ensures that the customer has reasonable access to the Binder Holder and Intermediary post sale.

Service Provider/Supplier stats in respect of perfomance and service level feedback from customers

Communications - sms, social media, advertisements, letter

Clients contacted to notify unsuitability of product following TCF reviewNumber of reported claims

Number of rejections

Number of outstanding claims

TCF MI (outcome 3, 4 & 5)


Outcome 6:Claims, Complaints &

Product Change

Correctly report on and analyse claims statistics

Exposure to bundles - Claims experience of embedded risk products for all products sold

Training on Complaints-Handling

Number of Complaints : Received per Type of product

Numberof Claims Complaints : Received

Numberof Claims Complaints : Resolved

Number of Claims Complaints : Pending

Numberof Claims Complaints : Rejected

Complaints monitored and action taken (root cause analysis)

Number of complaints relating to the same root cause per specific partner

Remedial Action taken

Volume and percentage of complaints referred to FOS

Records evidence of complaint handling process and resolution

Follow FSB FAIS turnaround time

Notifies Centriq of key themes arising that indicate the need for possible changes to products or service solutions

Complaint stats reviewed by senior management

TCF MI (outcome 6)

THEME OUTCOMES MI WHAT DOES THE MI SHOWREMEDIAL

ACTION

Culture and

Values1

% of staff who completed general TCF training

(sales and non-sales)

% of staff who completed additional TCF training

specific to their area

# of reps / agents / staff who received additional

training following high volumes of complaints

# of TCF goals in place by business area / division

% of TCF goals achieved

# of sales / non-sales rewarded for meeting TCF

targets

# of staff rewarded for suggestions to improve

service

Indicative of TCF awareness, strategy

communication and culture

Advertising

and

Financial

Promotion

2,3,5

Volume of complaints by promotion type

# of compliance breaches picked up by internal

approval process

# of compliance breaches by picked up by

Regulator

# of promotions pre-tested with target

customers

Unclear or inaccurate promotions

May indicate:

- approval processes are operating

satisfactorily

- a poor technical understanding in

the marketing areas

- a poor understanding of what

constitutes using clear, fair and

not misleading information

Misleading info to customers

Training needed

Pre-testing

required

MI Checklist – What to monitor and report on (FSA)

THEME OUTCOMES MI WHAT DOES THE MI SHOW REMEDIAL ACTION

Point of

sale and

Pre-

completion

2,3,4

Score quality of advice / info provided after

mystery shopping

Telephone monitoring

Volume of pre-completion customer queries

Unsuitable sales

Product overly complex

Product info unclear

After sales

service1,2,3,4,6

% of customers contacted within x

yrs./months of sale and reason for contact

# of customers contacted to inform of

better deal

# of customers contacted within 3 months

to inform of other products

# of customers contacted to notify of

product unsuitability following TCF review

# of customers contacted after completion

of satisfaction survey

Overall service satisfaction score for a

period out of 10

Measure of standard of

customer care

Measure of standard of

customer care post sale

Serious compliance breaches

due to mis-selling

Fairness related questions:

- What does this product do

- Why did you buy it

Indicates whether customer

understood product, and the

service he may expect to

receive


THEME OUTCOMES MI WHAT DOES THE MI SHOW REMEDIAL ACTION

Sales 2,3,4,5

Sales volumes by product type

Sales volumes by commission

Sales volumes by rep / agent

Sales volumes @ expectations

Offer to completions rate

Offer to completions time

Cancellation within cooling off period

Early redemption rate

QA percentage

# of new products introduced and sales

staff completing new product training

Product Suitability

Product affordability

Mis-selling

Misleading information

Product too complex

Wrong targeting

Unsuitable sales

Not fully understanding the key

terms

Lack of suitability of advice

Poor product knowledge

Inappropriate recommendation

Inadequate training

Review scripts to ensure proper

assessment of suitability and

affordability

Re-train

Review training programme and

material

Increased and focused quality

assurance (QA)

Performance reviews and

corrective actions – warning,

dismissal, commission penalty

Monitor and Report

Complaints 1-6

Volume of complaints

Complaints by rep / agent

Complaints by product

Complaints upheld internally

Complaints not upheld internally

Volume and % of complaints referred to

Ombud

% of complaints upheld by Ombud

% of complaints not upheld by Ombud

Complaints resolution time (1, 4, 6 weeks)

Ombud recommendations

Mis-selling

Training need

Unclear, misleading or unsuitable

marketing material

Lack of clarity of key terms

Misunderstanding

Unfair complaints handling

process

Performance measurements

Action taken to

improve standards

Review product wording

Re-train

Review scripts

Review complaints handling

process


THEME OUTCOMES MI WHAT DOES THE MI SHOWREMEDIAL

ACTION

Feedback

from Staff1-6

Periodic feedback sessions / workshops to ask

their opinion o whether the product / service

sold pose any risk to the fair treatment to

customers

TCF staff suggestion / ideas scheme related to

incentives

Meeting minutes / Session minutes

Reporting on ideas to senior management

Evidence embedding TCF within

culture

Helping business identify where

action can be taken to implement

TCF

Feedback

from

Customers

3,5,6

Asking open-ended questions:

- What does this product do

- Why did you buy it

- Did you buy this product based on the agent

info only

- How where you charged for this product

Customer understanding of the

product or service

Review product

wording

Review script

Re-train


Remedial Action/Risk Response/Risk Mitigation

To decide, in relation to the risk, one of the following:

Tolerate – risk accepted (guided by risk appetite statements in relation to risks) Treat – agree on action, due date, and person to mitigate risk Terminate – specific product or line of business / breach or cancellation letter

NOTE: Risk Appetite Statement:

If the risk is agreed or objectively viewed as material / significant, and management decides to tolerate the risk, Risk Officer is responsible to escalate the matter to the RFC, Board etc.

Examples: risk exceeds statement in risk appetite document

Remedial Action / Risk Response / Risk Mitigation

What to do with the data you have:

Analyse broker performance:

- Disclosures regarding product features- List of material disclosures and significant conditions- Simplified and standardised disclosure documentation- Verifying information up front to determine the customer’s risk profile- Claims- Complaints- Rejections- Commission- Ongoing communication- Meetings- Training attendance

NB Avoid underwriting at claims stage!!!

MI Brokers

MI Product, Service Providers


Monitor product performance

- What is the customer’s expectation- Appropriate and affordable- Against target market description- Competitiveness on price or product (benefits)- Simplified and plain language- Adequate distribution channel- Key Information Document (KID)- Website usage: products, key features, material disclosures and significant conditions,

claims process, complaints process- Premium adjustment (upward and downward)

Analyse service provider service levels

- Complaints- Expectation management- Consumer Protection- Ethical behaviour


Analyse Claims

- Per product type- Claims ratio- Claims vs Sales (per product / per broker)

Analyse Complaints (Root-Cause)

- Link to Outcome- Determine Remedial Action- Monitor overturn rate- Response and resolution timeline- Complaints vs Claims (per product / per broker)- General, FAIS, OSTI

Analyse Rejections in relation to brokers (disclosure before sales)

- Why would the customer think he could claim- Did the customer understand the terms and conditions- Has the customer been made aware of the limitations / his obligations- Continued service by broker after point of sale

MI Claims, Complaints, Rejections

TCF Process – UMA Specific

Point of Departure: Each business unit / function to fully understand and implements the undertakingsstated in the TCF Declaration.

This requires you to:

Appoint a TCF Champion

Train staff

Complete and continuously monitor the TCF Dashboard

Engage actively with Brokers / Insurers for guidance and assistance (training, tools, implementation)

Include TCF in the Meeting Agenda & Minutes with brokers / insurer

Engage continuously with the other business units to obtain TCF MI

Evidence through Management Information (MI) that TCF is embedded, monitored and reportedon (especially in relation to remedial action)

When a TCF Remedial Action is determined / proposed, then:

Provide information / documentation to support remedial action

Request and set up a Meeting with the Broker / Partner / BU to discuss proposed remedial action (MeetingAgenda and Minutes)

Include Underwriting/Claims/Compliance/TCF Champion in meeting

Agree with Broker / Partner / BU on proposed remedial action: detailed actions, timelines and responsiblepersons(s)

Report and record agreed actions, timelines, responsible person for evidencing purposes

Ensure changes implemented by the broker / partner / BU –

NB monitor progress!!!

TCF Process – UMA Specific

What TCF is NOT

And finally…

Outcome 1: Culture?

Outcome 2: Customer Comm & Disclosure?

Outcome 3: Product Design & Marketing?

Outcome 5: Performance & Services against expectation?

Outcome 6: Complaints Handling?

Outcome 6: Post-sale Barriers?

TCF from a UMA Perspective - Associated Compliance€¦ · TCF from a UMA Perspective. To...

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