From October 5 last year, ASIC started enforcing new standards and requirements for handling complaints. The rules cover financial services companies, including insurance firms, and are detailed in a new regulatory guide (RG) called RG 271. The guide details what insurance companies’ internal dispute resolution (IDR) systems need to account for to be compliant.
Yvonne Lam (pictured), special counsel with Clyde & Co, a global law firm with a focus on insurance services, sees RG 271 and other recent regulatory changes as part of a new phase of reforms following the Hayne Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Another way RG271 is different to most previous ASIC guides, she said, is the way it sets out what’s enforceable in its guidance.
“Previously, regulatory guides are guidance as to what the expectations of the regulator are,” said Lam. “But now this regulatory guide actually picks out and highlights particular provisions that ASIC says are enforceable.”
That could mean fines or penalties depending on the particular breach under the Corporations Act.
Lam said the new complaints guide also makes the potential categories that can constitute a complaint “quite significantly” broader. According to RG 271, a complaint is now defined as: “[An expression] of dissatisfaction made to or about an organization, related to its products, services, staff or the handling of a complaint, where a response or resolution is explicitly or implicitly expected or legally required.”
Lam said this definition covers, not just complaints made ‘to’ an organization, but also complaints made ‘about’ it.
“It can include anything relating to that organization’s products, services and staff, or also the handling of the complaint,” she said. “Effectively, what that should mean is that insurers and other licensees who deal with retail clients should see a natural increase in the number of complaints that they’re collecting and generating.”
The Clyde & Co special counsel said this has increased the compliance burden on insurance companies compared to the requirements under the old rule, RG 165.
“There’s a requirement under this [new] regulatory guide that you acknowledge a complaint within one business day, which is quite quick,” said Lam.
Then a company has 30 days to resolve the complaint and provide a final decision to the customer, compared to 45 days under the old rules.
“Once it goes through the threshold of what constitutes a complaint, then you start this process which requires your acknowledgement and processing of the complaint to resolve it to the customer, whatever issue that they’ve raised, and that timeframe has also been reduced as well,” she said.
Lam said RG 271 has a major focus on timeliness and ensuring companies are interacting with their complaining customers, so their customer is made aware that their issue is being actively managed and escalated as necessary.
This contrasts with the situation before the new guide where customers could be “left hanging” after going to the effort of submitting a complaint.
Lam said a second part of these new rules concerns complaints reporting.
“So now there’s a requirement for boards and senior management to receive reports that show any systemic issues - so any trends in the data relating to your complaints and to pick that up and escalate it and do something about it within the organization,” she said.
Lam said under RG 165 there was no specific requirement to escalate complaints up to boards and senior management.
Under RG 271, this reporting requirement, if not met by a company, is enforceable.
Another challenge for insurance companies is that complaints don’t have to come through an official complaints channel.
“You might have complaints coming through different channels,” said Lam. “Potentially social media or through the third-party claims handlers or others who are involved in the process.”
An expression of dissatisfaction from a customer on a social media channel managed by the insurer, like Twitter or Facebook, is now enough to constitute an official complaint.
In a previous interview with Insurance Business, Lam detailed the recent regulatory changes around claims handling.
From January 1 last year, a new definition under the Corporations Act has legally defined claims handling as a financial service. Now, anyone providing claims handling services either needs their own Australian Financial Services (AFS) license or must operate as an authorised representative (AR) under another AFS license.
