March 2022
The complaints statistics show that the overall number of complaints received by the IA in 2021 declined by around 9% from 2020, albeit the broad mix of types of complaints remained similar.
A key change can also be seen in the IA’s completion rate for handling complaints in 2021 versus 2020. In 2020, the IA received 1,434 complaints and handled 1,263 complaints to conclusion1. By contrast, in 2021 the IA received 1,304 complaints (as stated, a reduction of about 9% from 2020), but handled 1,550 complaints to conclusion (an increase of 22.7% from 2020).
The increase in the number of complaints handled to conclusion in 2021 versus 2020, may be partly due to improvements and efficiencies made in our complaints handling processes. These improvements aim to better focus the process on examining the merits of a complaint in a fair, objective and timely manner, with the twin aims of ensuring policyholders are protected and reinforcing high standards of conduct across the insurance market.
However, the improvement has also been enabled through engagement with insurers in the supervisory process, to encourage them to adopt best practice principles for their own complaints handling processes and in their dealings with the IA on complaints matters.
We take the opportunity in our Practice section in this edition to reiterate these best practice complaints handling principles.
Best practice principles for complaints handling by insurers
Complaints handling is a crucial part of how an insurer conducts business with its customers and is a key part of an insurer’s governance and operations. The way in which an insurer handles its complaints can dictate its overall reputation for trust, customer-centricity and fair customer treatment. Complaints handling is, therefore, an important conduct issue for the IA and, indeed, any financial regulator. This is reflected in the Insurance Core Principles of the International Association of Insurance Supervisors which provide that fair treatment of customers is about achieving outcomes which include dealing with customer complaints and disputes in a fair and timely manner.
From the regulatory viewpoint, the best practice principles which the IA expects an insurer to embed in its complaints handling processes are as follows:
Principle 1 – Treating complainants fairly
An insurer should handle complaints against it or its licensed insurance agents in a timely manner and in a manner that treats complainants fairly.
Principle 2 – Impartiality and objectivity
An insurer should handle such complaints impartially and objectively, with the aim of identifying the issues underlying the complaint, finding out the facts related to the issues, and analyzing whether the grievances which are the subject of the complaint are substantiated or unsubstantiated.
Principle 3 – Identifying root causes
If grievances are substantiated, or other problematic issues are identified in the complaint, the insurer should rectify them (e.g. with the policyholder), and most importantly identify the root causes to prevent reoccurrence and, if this highlights the need for improvements in the insurer’s controls or processes, make those improvements and implement training as necessary.
Principle 4 – Cooperating with the regulator
An insurer should respond to, cooperate and deal with the IA and other relevant regulatory (or law enforcement) authorities in the handling of complaints reported to the IA (or such other authorities). This principle is expressly stated in relation to agents in Section IX, paragraph 2(b) of the Code of Conduct for Licensed Insurance Agents, and the same implicitly applies to insurers.
Application of the best practice principles to non-conduct related complaints
One of the key functions of the IA is to ensure that insurers adopt proper standards of conduct in their dealings with policyholders and potential policyholders at all times. As such, even if a complaint against an insurer does not raise any regulatory conduct issues (for example, it is a pure contractual dispute or a servicing issue), the way in which the insurer handles the complaint is still a matter of regulatory concern and is subject to the IA’s purview. The insurer should handle such complaints in line with standards of good conduct as reflected in the 4 best practice principles stated above.
Accordingly, when the IA receives a complaint which does not raise any issues about the insurer’s conduct (such as a pure contractual dispute or a servicing issue), generally it will pass the complaint to the insurer to handle directly with the complainant. However, the IA expects the insurer to handle the complaint in line with the 4 best practice principles and may monitor the progress of the complaint to ensure this (by, for example, being asked to be copied in on the correspondence between the insurer and the complainant)2.
Handling of conduct-related complaints
Where a complaint does raise an issue of regulatory conduct (for example, an allegation of misrepresentation by a licensed insurance agent of an insurer in relation to an insurance product at the point of sale), the IA’s complaints handling team will, as a general rule, handle the complaint in line with our complaints handling processes. As part of these processes, the IA will gather the relevant facts and views on the case from the complainant, the insurer and any other person(s) whom the IA deems relevant, examine the merits of the complaint based on the totality of the information collated from a fair and objective perspective and reach a conclusion.
For these purposes, when asked to provide information and views on a conduct-related complaint by the IA, an insurer is expected to look into the case appropriately, gather the relevant information being sought and respond to the IA with the information and its views in a timely manner. The IA will expect the insurer, in giving its views, to do so objectively and impartially (in line with the best practice principles).
To assist insurers with this process, the IA has developed a template report which insurers can use for the purpose of providing information on complaints to the IA when required to do so. Please contact the IA’s complaints handling team for the template at [email protected] if you require a copy.
Complaints as an indication of culture
The way in which an insurer handles complaints, is one of the most prominent indicators of an insurer’s business culture and ethics and the way it treats its policyholders. For this reason, an insurer’s complaints handling processes are one of the main focuses for the IA during its routine inspections and supervision of insurers.
As such, to ensure fair treatment of its customers, it is important that all insurers (and particularly their boards of directors) give sufficient prominence and attention to the way they handle complaints and ensure that their complaints handling processes are founded on the 4 best practice principles stated in this article.
The Insurance Authority’s cooperation with the Insurance Complaints Bureau
The IA has wide powers to address misconduct under the insurance regulatory framework through proportionate supervisory action or appropriate disciplinary sanction. The IA’s powers do not, however, extend to adjudicating whether a claim should or should not be paid under an insurance policy (in the same way, say, as a court would).
The Insurance Complaints Bureau (“ICB”) provides an impartial dispute resolution mechanism which enables individual policyholders to resolve their claims disputes with insurers through (for example) impartial adjudication that is binding on the insurers which are its members.
In order to ensure that complainants have full opportunity to have their grievances considered in a fair and impartial manner, on 1 November 2021 the IA entered into a Memorandum of Understanding (“MoU”) with the ICB, so that where the IA receives a claims-related dispute that falls within the ICB’s jurisdiction (and where the policyholder’s consent is provided), the IA can refer the case to the ICB for handling and resolution.
By entering into this MoU, the IA can continue to focus on upholding proper standards of conduct and sound business practices across the insurance market through its complaints handling work, whilst also ensuring complainants have the benefit of the ICB’s trusted dispute resolution mechanism to address their claims related disputes. Through this cooperation, the IA and the ICB can ensure that complainants’ grievances are considered efficiently and effectively by the appropriate body, thereby reinforcing trust in the insurance industry and upholding the principle of fair treatment of customers.
For further information on the IA’s complaints handling processes, please go to our “website”.
For further information on the ICB, please go to its website by clicking “here”.
Note:
1Concluded complaints include when the IA’s complaints handling team decides, based on the available facts and evidence of the complaint, to transfer the case to the IA’s enforcement team for consideration as to the appropriate enforcement or follow-up action to take. In 2021, 93 cases were transferred to the enforcement team versus 146* in 2020. Apart from this, the IA also concluded another 49 self-reported cases from insurers / intermediary firms in 2021, of which 32 cases were transferred to enforcement team; versus 39 in 2020, of which 34 were transferred to enforcement team
* Among the 146 cases, 60 were against one licensed insurance agent related to the same allegation.
2Where the complaint involves a claims dispute which falls within the jurisdiction of the Insurance Complaints Bureau (“ICB”), with the policy holder’s consent, the IA may refer the complaint to the ICB for further handling (see later article on the IA’s co-operation with the ICB). In this event, the insurer will be required to respond to and co-operate with the ICB in the handling of the complaint, in line with Principle 4 of the best practice principles.