Some intermediaries in the insurance industry believe that their service delivery is dependent on the service provided by insurers. They are of the view that their performance is directly attributable to the service that insurers offer.
Some non-direct insurers on the other hand believe that it is the responsibility of the broker to ensure that the customer is properly serviced. The view is that the intermediary is remunerated for rendering adequate service to customers.
One of the reasons for the development of the binder holder model was that some insurers and intermediaries believed that brokers were in a better position to service customers. Brokers had smaller scale operations, closer relationships with customers and less company policies to adhere to. Many traditional insurers conceded that they had antiquated systems, too many company policies and that customers’ expectations of quick turnaround times were not adequately met by insurers.
Given the above many insurers were willing to pay fees to brokers to facilitate in service delivery.
This outsource model however comes at a cost to the whole industry. Many of the fees paid in terms of the binder agreements for binder services have been for comprehensive and legitimate services rendered by intermediaries. In other situations this has not been the case and it has been these kinds of arrangements that have come at a great cost to the industry.
Not only has there been an increased regulatory and supervisory implication but intermediaries and insurers have had to re-build consumer confidence in the insurance industry. They have had to ensure that customer’ expectations of receiving service at adequate levels are achieved in the industry.
Adequate servicing of the client is not only about ensuring a claim is paid out. It is about ensuring that the client is satisfied that the product he or she has taken up will perform at the point in time when it is required.
Inadequate servicing over the years has led to the development of treating customers fairly (TCF), and is not only a South African phenomenon. It exists all over the world.
Many think that TCF is only an insurer issue. But this is not correct. TCF are principles that all role players in the industry must ascribe to. It requires intermediaries and insurers to work together. If the one fails in service delivery the other will fail as well.
All the TCF principles are intertwined with one another. If you fail at one principle you will fail at all because the client will have an unsatisfactory experience somewhere in the life time of the insurance policy.
Insurers are responsible for developing products that meet the needs of the market, training intermediaries on the product they have developed, making clients the epicentre of their organisation, and ensuring that claims handling is done in a fair and just manner.
Intermediaries must also ensure that the client comes first; they need to take the responsibility and understand and learn about all the products that they want to offer their clients. Their responsibilities will still be continued to be governed under FAIS.
For the intermediaries that have always adequately serviced their clients on a long-term basis this has worked in their favour. Having the conversation with their client to agree on any additional fees should not be too difficult. As the market starts implementing the Retail Distribution Review, outcomes that will distinguish one broker from another is their level of service and quality of advice. In addition, insurers will be required to ensure that their own servicing standards are up-scaled if they want to attract high quality brokers to place business with them. Consumers of today are fickle and not willing to part with their hard earned money for sub-standard service.