Case study: Information after point of sale
'Firm P' profile
Firm ‘P’ is a bancassurer whose group product range includes a wide variety of banking, life and pensions contracts, unit trusts and structured products. It has a communication strategy to customers for most of these product areas. This strategy is aimed mainly at cultivating new business. A recent initiative at Firm P was designed to improve the culture of the firm by encouraging staff to seek continual business improvements, keeping customers as the focal point as drivers and/or beneficiaries of the improvements.
TCF considerations
Principle 7 requires a firm to pay due regard to the information needs of its customers and communicate information to them in a way which is clear, fair and not misleading. TCF brings further considerations. Consumer research points to the need for sufficient but not excessive information, couched in terms customers can understand. Our TCF consumer research tells us they find it easiest if key information is isolated, up front, and there are signposts to more detail. This study looks at the type of customer and product specific information provided after a contract is established.
Information post-sale
Firm P appreciates that its customers want easy access to basic information about the value of their contracts and it aims to provide information promptly to its policyholders and investors. Periodic statements are required for some products, such as structured capital-at-risk contracts. Other products in the group's range also generate annual statements automatically. Firm P uses the messages and language in its post-sale information to complement and confirm information provided before the sale.
Senior management takes responsibility for embedding TCF. It initiates a strategy to review the types of event, after the sale, that could pose risks to customers. Once identified, the plan is to review if any risk could be reduced by providing information that the customer should be aware of to help them make better choices and avoid pitfalls.
Keeping the focus on customers, Firm P considers some of the following matters as it reviews and builds its business processes:
- Identifying its customer's information needs, determined by either customer profile and/or product.
- Satisfying information needs in terms of design and content of information, providing easily understandable facts.
- Highlighting important information to customers with signposts to more detail.
- How it conveys technical information to its customers, avoiding jargon wherever possible.
- Providing contact information and staff to respond to customer requests for information.
- Handling requests for important information e.g. some forms and valuations by trained staff.
- Systems and controls on how it manages its communication strategy.
- Whether the distribution channel a product is sold through affects the quality of information provided to the customer.
In its plans for communicating with its customers, especially around valuations, Firm P will examine how such information is assimilated and make any changes necessary for improvement. It will also make renewed attempts to use plain language and continue to remove jargon. Wholesale review of information was rejected on grounds of cost, but the firm will build plain language controls into the process of revising its literature.
Senior management ensures that the firm's communication strategy is expanded to place more weight on existing business communications.
In response to customer needs, Firm P decides it will explain the direction of interest rates, up or down, every time a change occurs and will highlight the information in a box on a letter to bring it to the attention of its customers. It will also provide information on MVA-free dates to with-profits policyholders where appropriate.
Firm P plans to improve staff training. This includes plans to increase recognition of staff who learn more about how all of the firm's products operate, placing them in a better position to help customers with enquiries. Cost constraints currently mean that more specialist training will be targeted at a limited number of appropriate staff.
Dealing with changes
Lifestyle changes, contractual events and economic events were identified in the firm's review as areas where customers are potentially vulnerable to risk. This is especially relevant in the area of life assurance, where contracts are long-term. The firm considered the following areas in the context of TCF.
• Contacting customers before key dates or events.
• Handling requests for details of contract options by appropriate staff.
• Setting up reviews to enable the firm to identify issues that it might wish to bring to the attention of its customers when the issue may have an impact on their product.
• Providing reminders to customers at relevant times, e.g. with valuations, about what their contracts provide and what consumer needs are satisfied through their contracts.
In the light of these considerations, Firm P examines the amount of information it could give customers who were not always clear about the options under their life assurance contracts. More experienced staff are designated as the contact points on questions about conversion or encashment. Some non time-critical information that the firm wishes to communicate will not be sent separately but will be included with an annual statement. The firm prepared a few simple fact-sheets about the options and taxation consequences of single premium bonds. Staff will provide some information to customers to help them decide how to deal with their policies or steer them in the direction of obtaining professional advice.
The firm also decides to provide some special training for a few staff on some long-standing policies underwritten by a company the firm bought over 20 years ago.
Assessment for the future
The firm recognised that the TCF principle goes hand-in-hand with consumers' financial capability. Over time, customers' needs for information change as they became more capable consumers. For now, Firm P decides that it will:
- Monitor the effectiveness of communications – examining good and bad results.
The firm also decides to:
- Look at plans for outsourcing any function and consider the specifications for standards of information.
- Review its interaction with Third Party Administrators (TPA) and current TPA systems and controls.