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Treating Customers Fairly Is A New Minimum Standards

Every organization needs to regularly monitor and enhance above control mechanisms within the organizations

Photo Credit : Reuters


A bank gave loan to a customer, and along with it sold an insurance plan to cover the loan for which premium was payable for two years. The Bank had the option to sell a single premium insurance plan to the customer, which was cost effective for the customer, instead the Bank sold the two payment term plan as it earns more commission from the Insurance Company as compared to single premium product. Subsequently the Regulator directed the insurance company to refund the excess commission paid on this product, amounting to few hundred of crores, to all the insured members from the shareholders funds. The insurer has filed an appeal against the order of the regulator and final outcome is pending.
In another instance, a consumer forum held that Insurance Company is liable to pay death claim of one of the co-borrowers of loan, even though he was not covered as a life assured. As the loan document was signed by both co-borrowers, the consumer forum directed that the insurer should have itself inquired and should have covered both the borrowers under the insurance policy.

The banking regulator in recent past introduced the concept of ZERO liability of the bank consumers if the electronic transactions are made due to fraud or involves negligence or deficiency on the bank's part.  

Above instances highlight the need to fairly treat customers, an approach adopted and recognized by regulators and judiciary within India and across the world. Treating Customers Fairly (TCF) is not a phrase which is new!

Regulators around the world, especially post 2008 financial crisis, have become more suspicious, less flexible and have levied punitive damages on various financial organizations that have carried out their businesses in a manner contrarian to the beneficial outcomes for its customers. Banks and other financial institutions have paid more than $150 billion in fines, settlements, and restitutions to the homeowners and investors since the 2008 financial crisis.

In the Indian context, there has been a visible shift in the purpose and intent of various Indian regulatory authorities that have shown a strong bias towards acting in the interests of the "Customers" and putting customers' interests in forefront in all facets of business.

The consumer foras also generally provide judgments/ benefit of doubt to the consumers in ambiguous situations. National Commission considered a "mosquito bite" as an accident for paying a claim on death of a customer who was covered for death due to accident. An accident is something that happens unexpectedly and is not planned and that a mosquito bite is something which happens all of a sudden without any act of omission on part of the victim, the National Commission said.

It goes without saying that being trustworthy and customer-centric has become the prerequisites for establishing a "Brand". The concept is seen by companies as the 'differentiator' between a satiate and WOW creator.

The adoption of TCF does involve complete change of organization culture and re-engineering of various processes from sales to all customer facing processes. Following are the key areas of focus in order to achieve desired outcomes of TCF,

a) Sales and Marketing Material - Using easy and simple promotional material ; all charges stated clearly defined, jargons used, if any, are fully explained.
b) Advice and Sales Process - Selling a product as per needs of customer.  
c) Fact Finding and Information Sharing including complete disclosure of any fees and charges to a Customer to ensure product suitability.
d) Complaint Handling and Resolution -Dedicated complaint handling department; shortest resolution time within regulatory prescribed timelines, regular monitoring, recording and analysis of complaints with due reporting to Management.
e) Staff Training(s) to create TCF awareness and drive pro-customer behaviour - the regular product training to sellers so that they can offer product(s) which are suitable, duly assessed, affordable from customer standpoint at the time of sale.
f) Remuneration / Incentives Practices - Ensuring that there are elements of staff remuneration in an organisation related to TCF and prescribed service standards encouraging TCF.

The organization needs to regularly monitor and enhance above control mechanisms within organizations.

The buck does not stop here, not only the organizations, even the endorsers and celebrities will be under the radar for engaging in misleading advertisements.

Still lots of work needs to be done in this field. The organizations are yet to completely realize how even one consumer if disgruntled, can impact the reputation and question the intent of the organization which claims to treat its customers fairly.

As most products in financial services are getting standardized, the key differentiator remains customer services. It can become competitive advantages for the organization which follows TCF concepts from start of customer journey to all touch points in this journey.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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customers banking opinion

Vikas Anand

The author is Chief Compliance Officer, Canara HSBC OBC Life Insurance

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