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| E-Newsletter | Issue 2
In this issue: • Packaged Accounts • Applying the 'Academy Solution' to the changing labour market • Outsourcing trends and their effect on the regulatory environment • ‘G-day’ and insurance equalisation • Alternative Investments
Packaged Accounts
New rules requiring banks and building societies to check whether customers are eligible to claim on insurance cover contained in packaged bank accounts have been published by the FSA. Most packaged accounts include a suite of insurance policies, but until now banks and building societies were under no obligation to assess eligibility on every policy in the package. The result is that some customers have been sold packaged accounts containing policies that are not tailored to their personal circumstances. From 31st March 2013, banks and building societies must: • Check whether the customer is eligible to claim under each policy and share that information with them; • If the sales adviser is recommending policies in the package they must establish whether each policy is suitable for the customer and alert them if some are not, and; • Provide customers with an annual eligibility statement setting out the requirements to claim each of the benefits under each insurance policy in the package.
Sheila Nicoll, FSA director of policy, said: "We are closely monitoring the promotion of packaged bank accounts and the new rules will make sure customers know what they’re buying and that they can rely on the product or have the limitations explained before buying." The FSA has not placed an obligation on firms to investigate historic sales of packaged accounts; the focus is very much on altering the sales process going forwards. Even so, a number of third party claims management firms are undertaking marketing campaigns to encourage customers to complain. While the FSA has made no suggestion of widespread mis-selling, the role that third party claims managers have to play in fuelling complaints cannot be underestimated.
In the latest research into the management of complaints carried out by Hazell Carr, 70% of companies regard ‘increased press/media attention’ as the main reason for an increase in complaints over the last five years, closely followed at 66%, by a ‘rise in the profile of claims management companies’. Hazell Carr conducted the research amongst financial services organisations in the UK that together handle over one million complaints a year. More than 10 million customers hold packaged bank accounts, so it is essential that the new requirements are implemented quickly and smoothly. Hazell Carr is keeping a close eye on any new developments in this area.
The FSA hope that these new regulations will prompt customers to check whether their circumstances have changed and whether the policies continue to meet their needs.
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Applying the 'Academy Solution' to the changing labour market
The labour market is changing. Never before have we had such a mobile and transient workforce. The concept of a ‘job for life’ is redundant, while the demand for temporary workers and professional contractors continues to increase. Recent figures from the Recruitment and Employment Confederation (REC) indicate a mixed picture for the temporary staff and contractor market in 2012. The number of temporary vacancies in London has continued to decline, but this figure masks an overall increase in job vacancies across the UK. Coupled with this, the REC figures also highlight a 0.4% increase in average weekly earnings across the UK, with particularly strong regional rises of 7.9% and 7.1% for the East Midlands and Northern Ireland in particular. The rising pay rates indicate that there is significant demand in the market for consultants with the right skills and expertise. This REC data supports Hazell Carr’s own findings, which indicate a steady increase in pay expectations from experienced contractors. In our experience, the increase in contractor pay expectation has been fuelled by a growth in demand for complaint handlers, particularly for payment protection insurance projects. With many organisations now reliant on contractor and temporary staff to meet the challenges of a rapidly changing
environment, it is essential that suppliers continue to innovate to help relieve the increasing cost pressures of temporary recruitment. Hazell Carr has developed the 'Academy Solution' to meet this challenge. The principle of the Academy is to attract talented graduates, undertake rigorous screening to shortlist the strongest candidates and then provide initial training specifically tailored to client requirements. This approach ensures Academy consultants are able to make a difference to client operations as soon as they are deployed. The Academy Solution was specifically designed to assist organisations with
high volume projects that require large numbers of consultants for short periods of time. Typical examples include peaks in complaints, new business processing and customer contact exercises. This type of project does not require the expertise of professional contractors, but does require a level of professionalism and capability that is often lacking from agency staff. The Academy Solution has been used for a variety of client projects over the past two years and has received excellent feedback. We would welcome the opportunity to discuss any of the issues in this article or the Academy Solution with you in more detail.
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Outsourcing trends and their effect on the regulatory environment
The Financial Services industry is going through a significant period of change. Key factors such as market volatility, increased regulation, changes in demand, globalisation and competition are causing the industry to adopt new operating models, with outsourcing being adopted as a key strategy to survive these challenging times. Outsourcing allows companies to focus on their core business, whilst the outsourced partner is improving their customer satisfaction, unlocking cost efficiencies and streamlining processes. The outsourcing market is changing, with more clients seeking vertical expertise from their suppliers to ensure efficiency, accountability and synergy between their business strategies and the services provided. Outcome-based pricing and strict service level agreements are becoming more commonplace as the price of the outsourced business is quantified and charged by the value provided. Competitive pricing over the life of a contract is also increasing with price adjustments judged against specific price indexes. Procurement organisations and third-party advisors are taking a more active role in purchasing decisions and vendor selection, causing the re-negotiation of many existing contracts and generating savings and improved terms. Outsourced contracts are also becoming more
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work are being split and awarded to the best service providers to create a ‘best-of-breed’ approach. Risk is reduced and contracts are for shorter periods of time with suppliers changed more regularly. Increasingly, clients are asking their providers to identify inefficiencies within the client organisation’s internal environment that contribute to high costs, and how those inefficiencies can be addressed. The key to success in outsourcing, is putting together good contracts with enforceable contractual obligations and supplier liabilities. Within the financial services markets, remedies and measures for poor performance are critical. Data protection needs to be a primary consideration in order to avoid potential litigation and reputational damage and exit responsibilities need to be clearly defined.
fluid as they need to react to changes in the business where volume is uncertain and demand is difficult to quantify. Outsourced contracts are being managed and executed by partnerships and collaborations and joint ventures are becoming more commonplace. Conversely, a higher proportion of contracts for outsourced
SYSC 8 compliance is essential under the regulatory system where financial performance and the soundness and continuity of services and activities is critical. The financial services company remains fully responsible for discharging all of its obligations under the regulatory system even under an outsourcing arrangement. The key criteria to be considered are that the outsourcing must not result in
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the delegation by senior personnel of their responsibility; the relationship and obligations of the firm towards its clients under the regulatory system must not be altered; the conditions with which the firm must comply in order to be authorised, and to remain so, must not be undermined and none of the other conditions subject to which the firm’s authorisation was granted must be removed or modified. There is an expectation that the outsourcing partner should exercise due skill, care and diligence in their duties but the final responsibility for ensuring this happens must remain with the financial services provider. Complaints handling is a particular area that financial services providers often seek to outsource. Handling complaints effectively is not only a regulatory requirement, but a key way that organisations can differentiate their services from competitors. It is well known that a well handled complaint can turn a critic of a company into a strong advocate more effectively than almost any other activity. The ongoing economic downturn has also led to many organisations looking at ways of reducing costs and staying efficient. Outsourcing non-core areas of business can offer the required cost efficiencies. Other reasons for outsourcing complaints include: • High Volumes - FSA complaint statistics indicate that the
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volume of complaints continues to be very high across the industry, meaning many organisations are finding it difficult to meet regulatory four week and eight week time limits. Low Volumes - Low volumes of complaints, particularly regarding complex cases such as Pensions Review, mean that the retention of skilled complaint handlers can become impractical. Legacy Business - Complaints about legacy business products are becoming increasingly difficult to support. Specialist Skills - A specialist provider can bring skills and expertise that is simply unavailable to in-house staff. Systems - Bespoke case and complaint handling systems can improve the efficiency of an operation.
The focus on reducing operating costs and improving efficiency is likely to be a key theme for many organisations over the coming months. Contact us on 0118 951 3971 to find out how your organisation could benefit from our expertise in this area.
"The key to success in outsourcing is putting together good contracts."
For more information about outsourcing visit: www.xafinity.com
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‘G-day’ - Committed to Insurance Equality
'G-day' is a key date in the insurance calendar. 21st December 2012 sees the European Court of Justice’s rule that insurance premiums should not vary by gender, put into practice. The British Insurance Brokers’ Association estimates that the ECJ’s ruling will increase motor cover insurance costs by £300m per annum alone, with women subsidising the premiums of male drivers.
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Women are also expected to have to pay more for life and critical illness cover and whilst they do benefit from relatively cheaper income protection cover and more favourable annuity rates, fewer women than men tend to have DC pots to convert at retirement. This means not as many will benefit from better annuity rates as will lose out by way of higher insurance premiums.
However, many are dubious that insurance costs will go down for anyone. There may be adverse impact on premiums from Solvency II, a more prudent approach to premium setting, and some may also use the changes as a smokescreen to hike up their profit margin. Indeed, with the removal of tax relief on investment funds, often used by providers to subsidise the cost of general insurance, overall costs are expected to rise by 10%-15%.
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Alternative Investments
Many pension funds are having to consider alternative investments to reduce balance sheet volatility and risk since the global financial crisis, further exacerbated by the Eurozone crisis. Over the last year, there has been a 10% increase in the allocation to alternatives with 50% of European pension schemes included in
Mercer’s annual European Asset Allocation Survey, having some holding in alternatives - including hedge funds (or fund of), diversified growth funds, emerging market debt or high-yield bonds. Including alternatives in your portfolio of assets is the key to managing risk and reducing volatility. This will also require educating Trustees on the quirks of
these less well-known assets, being aware of the legal risks and remembering the golden riskreturn rule while bringing in the benefit of further diversification.
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Conferences
Hazell Carr’s actuaries and industry professionals have been in attendance at numerous conferences this year, sharing their knowledge, networking and exhibiting specialist services. Hazell Carr’s first stop was the Pensions Conference, held in Brighton between May 30th and June 1st. The core theme this year was ‘Fresh Perspectives’, which addressed issues such as how to create and maintain a truly sustainable pension scheme. Hazell Carr was also in attendance at the Risk and Investment Conference in Leeds between June 27th and 29th,
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which covered diverse topics from anthropology and cultural theory, through to dynamic hedging and audit practice. Speakers were drawn from a variety of backgrounds and even included a speech from TV presenter and mathematician Johnny Ball. The most recent stop was this year’s GIRO Conference, where the general insurance actuarial community gathered in the commercial hub of Brussels. The conference took place between September 18th and 21st and its primary theme was: ‘Juggling uncertainty: the actuary’s part to play’, which highlighted the uncertainty of the European economic climate and
how to cope with the additional questions and responsibilities this can entail. Still approaching is the Momentum Conference, which will be held between the 2nd and 4th December in St Andrews, Scotland. It is themed ‘Thriving on the unknown’ and will examine how actuaries can survive in the current economic climate. Hazell Carr hopes that the conference will be a gateway to better understand the actuarial market. If you are attending, please do not hesitate to visit us at our stand.
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Word Puzzles
If you answer all questions correctly you will be in with a chance to win a Hazell Carr gift bag. Just send your answers to: contact@hazellcarr.com.
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Hazell Carr is one of the UK’s leading providers of skilled resources operating in the financial services industry today. For more than a decade, Hazell Carr has provided companies with a range of placement services, focusing on complaint handling, customer services, pensions administration and actuarial expertise. With experience across many different sectors and projects, our clients benefit from a highly experienced, skilled and versatile resource pool (staff and associates), helping them manage workloads, develop best practice and transform their levels of customer service.
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Hazell Carr is a trading name for Xafinity Paymaster Limited. Registered Office: Sutherland House, Russell Way, Crawley, West Sussex RH10 1UH. Registered in England and Wales No. 3249700. Paymaster (1836) Limited is authorised and regulated by the Financial Services Authority. A Xafinity Limited Company. The information contained in this newsletter should not be relied upon for detailed advice or taken as an authoritative statement of the law.