On 1st May, the FCA issued a communication aimed at giving clarification to firms on the subject of complaints handling in the context of the complexities arising from the Covid-19 pandemic. A clear set of guidelines for firms, with equally clear instructions on the transparency expected of them in the event they are unable to comply.
The Story So Far
The subject of complaints has already generated much media coverage and resulted in a number of highly public threatened legal actions seeking confirmation of cover under disputed coverage clauses relating to various different losses suffered by firms. There is little doubt that further legal challenges will follow and it is rapidly becoming a PR nightmare for a number of firms, many of whom perhaps feel they are facing a trial by media without any real consideration of the facts.
There are a number of key areas where it is becoming increasingly apparent we will see large volumes of claims and complaints arise. Many firms will feel they have little to lose by pursuing a complaint in the event they get no financial support from their insurer.
Business Interruption claims have been at the centre of the disputes so far and the FCA have taken the somewhat unprecedented action of seeking to work with certain insurers in identifying a number of test cases that can be used to secure an early legal interpretation of the circumstances viz a vis the various different policy wordings.
But Business Interruption claims will not be the only source of complaints. Alongside other coverage related disputes across a broad range of policy types will arise questions around issues such as:
- Speed of response / speed of service, particularly in circumstances where an insured firm might seek to argue that a failure to act swiftly by their insurer has contributed to their financial position;
- Extent and breadth of coverage in the event that claims are payable;
- Complaints arising from matters such as policies no longer providing fair value or policies that can no longer be operative given the current lockdown. There has been enough media coverage already about premium refunds that we can expect to see more people arguing the premium they paid should, at least in part, be refunded.
It is the breadth and complexity of issues that is likely to test the limits of insurer’s current complaints handling capabilities. Many are simply not geared up for the complexity and volume of complaints they are, or are likely, to receive. And the regulator is offering little flexibility on normal standards and expectations.
Firms handling of complaints during coronavirus
In anticipation of the expected influx of complaints, alongside the logistical challenges all firms currently face in maintaining their operational capabilities, the FCA has set out the 3 areas it expects firms to prioritise. These were identified in an update to firms issued on 1st May.
“We expect firms to prioritise:
- paying promptly complainants who have been offered redress and accepted that offer
- the prompt and fair resolution of complaints from:
- consumers who are likely to be vulnerable to harm if their complaint is not resolved promptly and fairly, and
- micro-enterprises and small businesses who are likely to face serious financial difficulties if their complaint is not resolved promptly and fairly
- sending timely holding responses to those complainants in 2. where their complaints cannot be resolved promptly.
If a firm cannot deliver these 3 priorities adequately and effectively through home working, then we consider it could be appropriate for the firm to maintain the minimal physical onsite presence needed to do so. This is as long as the site is configured for social distancing in line with Government guidelines.”
Firms are faced with seeking to deliver on these whilst balancing their obligations to the health & safety of their employees. Furthermore, the FCA has made it clear that it expects to see firms maintain the quality of their complaint handling process, a statement that has been made quite explicitly and despite the logistical challenges firms are facing with a shift to remote working. They have made it clear that they “do not expect the current circumstances to materially affect firms’ abilities to”:
- communicate with their customers about the complaints procedures and the FOS;
- allow consumers to submit complaints;
- acknowledge those complaints, from which time the ‘clock is ticking’ for the firm.
The FCA have always been very clear that their mission is to reduce actual and potential harm to consumers through the continuing oversight of firms and of individuals controlling firms. Against that it is right that they hold the market to a high standard on behalf of the consumers they are tasked with protecting.
So in reality, there are two options for firms:
- meet their obligation; or
- explain to the regulator why they have failed to do so and what actions they are taking to manage and address their non-compliance.
This is not necessarily a comfortable place to be for any firm, regardless of the background circumstances but it is the reality of the regulatory regime and senior management function holders need to be very aware that it is they that may ultimately be held to account.
Defining Your Firms Relationship with the Regulator
These expectations from the FCA provide good examples of the shift from prescriptive regulation to an outcomes-based approach centred on an assessment of the culture within firms. Culture may have been a relatively short paragraph in the FCA Business Plan for 2020/21 but in our minds, it is very clear that it will underpin much of the work done by the FCA in coming years. We certainly expect the FCA to look at the way firms respond to complaints in the current situation and use that information to help form opinions about the culture of those firms in a wider sense. Don’t let complaints be the factor that defines your firm’s culture in the mind of the regulator.
ICSR is well placed to support firms looking to ensure they deliver a consistent and compliant complaints service to their customers in these challenging times. Whether you need high-level advisory support, or very specific complaints overflow resources, ICSR can assist. More details of our Complaints Service can be viewed here.
If you would like to discuss the way your firm is currently responding to complaints arising from the Covid-19 situation and how the regulator might view that from a wider regulatory perspective, please contact us in complete confidence.