Case Study – Using MI to monitor TCF Complaints & Cancellations Data
Information relating to customer complaints and cancellations can be an important tool for monitoring the implementation of TCF principles for any business.
The number and type of complaints received can often reveal areas within the sales process which could be improved if analysed regularly at an appropriate level within a business.
Of course customer dissatisfaction doesn’t always equate to a customer who has been treated unfairly, but by reviewing complaints and cancellations on a systematic basis a business will be able to distinguish poorly treated customers far more easily and also illustrate to a regulator that it operates a process which aims to continually improve the way it deals with its customers.
Implementing a ‘Complaints and cancellations MI strategy’ – key steps
- Assign roles: decide who should be involved in reviewing customer complaints and cancellations. Typically the core members will be senior managers from operations, sales and marketing and compliance functions as these will all be involved in complaint handling, resolution and change management.
- Decide on the frequency of review: typically monthly works, as this provides regular oversight and can often be combined with other regular business review meetings.
- Allocate responsibility for data collection and distribution: this will ensure that data is collected and distributed accurately and in a common format, enabling a consistent approach at each monthly review.
- Decide on the data elements to be captured:
Complaints might typically include:
- total number of complaints per month
- a reason code
- some form of summary of the complaint
- whether resolved within one business day
- date received
- date acknowledged
- final response date
- date resolved
- Complaints by sales adviser (to identify individual training or development needs within sales teams)
A separate log is often maintained of all complaints referred to FOS and of any compensation paid to a customer together with a reason code for the award.
- Customer cancellations:
Very similar data elements can be collected in relation to customer cancellations (whether in relation to the loan product or related insurance policies). Key metrics to capture include:
- the number of cancellations expressed as a percentage of the total number of sales
- penetration rates of the sale of ancillary insurance products
- Identify data held elsewhere: where data is not immediately to hand within the business identify where data can be obtained, for example lenders and/or insurers.
- Minute the meetings and agreed outcomes/actions.
- Follow up outstanding actions at regular intervals.
Many firms collect customer cancellations and declined claims data in relation to insurance policies they sell to customers alongside loan products. They receive this data either from the lender with whom the application was placed or directly from the insurance provider.
Typically the following data elements are tracked on a monthly basis:
- Number of cancelled policies and reason for cancellation
- Number of customer claims declined by the insurer and reason for declines
- Number of policies sold expressed as a percentage of the total number of completed loan cases
- Number of cancellations expressed as a percentage of policies sold.
Analysis of each data element can be tracked over time, by individual product, individual sales representative or some other borrower characteristic.
Interpreting the data
Some typical conclusions to draw from monthly data might be:
- Cancellation rates exceeding a certain level together with associated reason codes can indicate either customer misunderstanding or dissatisfaction with the product. Dependant on the reason code cancellation rates can be improved by better disclosure, better understanding of the customer’s individual needs and use of clearer selling aids.
Of course not all customers who cancel or terminate policies because they believe the product is unsuitable for their needs, but monitoring this area can inform a business whether that category of customers is significant.
- Customer claim decline rates exceeding a certain level together with an associated reason code (for example ineligibility for cover selected) probably indicates an inadequate understanding of the customer’s requirements and circumstances – or perhaps a need to highlight exclusions more clearly in the product literature.
A customer who can’t claim on a policy is unlikely to feel they have been treated fairly. Improvements to fact finds and clearer explanations of product features can assist in reducing customer decline rates. Again the ‘reason code’ is key as there will always be a number of declined claims unrelated to eligibility.
- Analysing penetration rates of insurance products is important to ensure selling practices do not inadvertently ‘bundle’ the selling of such products at the point of sale regardless of suitability or eligibility.
Penetration rates which exceed the market norm can indicate that other factors are influencing the sales process other than the customer’s requirements. As already mentioned it’s unlikely that fair treatment can be demonstrated if a product is unsuitable or the customer can’t qualify for cover.
- High cancellation rates in themselves can be an indicator of a poor customer experience. Equally if the cancellation rate when expressed as a percentage of all policies sold is also high it may indicate that a specific product rather than a sales practice is proving problematic.
In such circumstances it’s often good practice to reassess the product with the provider and discuss whether general cancellation rates across all distributors are following the same trend. Product development is often dependent on receiving feedback as to what works and doesn’t work from a customer perspective.
MI – conclusions for TCF
By monitoring key indicators businesses can measure whether the principles of fairness have really been incorporated within their day to day practices.
The positive out come of TCF monitoring through MI is that customers are treated more fairly, sales increase and cancellation rates drop.
Last, but by no means least, MI offers firms a ready-made process to demonstrate to a regulator that steps have been taken to measure the implementation of TCF principles.