By Ferdi Coetzee, Masthead Regional Manager: Eastern Cape
For financial service providers (FSPs) offering advice and intermediary services in short-term insurance, effective claims handling is essential for success. This article explores common challenges and practical solutions to help FSPs enhance their claims handling processes and foster exceptional service and lasting client relationships.
The short-term claims process is often where FSPs truly prove their worth. While selling a policy is relatively straightforward, managing claims effectively – ensuring a smooth and fair claims process – sets competent FSPs apart. Policyholders rely on their FSPs for guidance during losses – and delays, poor communication or inefficiencies can quickly erode trust, leading to reputational damage and regulatory scrutiny.
This article delves into the regulatory framework for short-term claims handling, key Treating Customers Fairly (TCF) obligations and best practices to ensure compliance while delivering a smooth and transparent claims experience.
Regulatory and TCF obligations
Short-term claims handling is classified as an intermediary service under the Financial Advisory and Intermediary Services (FAIS) Act. The Treating Customers Fairly (TCF) principles, embedded in the FAIS General Code of Conduct, ensure that FSPs act in the best interest of their clients. Additionally, the Policyholder Protection Rules (PPRs) under the Short-Term Insurance Act 53 of 1998 reinforce TCF principles by mandating fair treatment throughout the policy lifecycle, particularly during claims processing.
Regulators, including the Financial Sector Conduct Authority (FSCA), require FSPs to implement TCF in their claims processes to guarantee efficient service, clear communication and fair resolutions. Compliance with TCF is not merely a compliance aspect; it reflects an FSP’s dedication to ethical business conduct, consumer protection and responsible claims management.
Key TCF principles for claims handling
1. Outcome 3: Clear communication
FSPs must ensure policyholders fully understand their coverage, including exclusions and excesses, to prevent disputes during the claims process. Clients should receive step-by-step guidance on claim submissions, required documentation and expected timelines. Regular updates on claim progress and clear explanations for approvals or rejections are essential to maintaining trust. In cases of rejection, FSPs should educate clients on their rights, including escalation to the National Financial Ombud Scheme South Africa (NFO).
2. Outcome 4: Sound advice
All new advice provided to clients should begin with a comprehensive risk assessment process to accurately determine their genuine short-term insurance needs.
Affordability is an important consideration, but it should be addressed after the client has been advised on their overall insurance needs. Clients must first understand their full risk exposure – and by focusing on needs-based advice first, FSPs help clients make informed decisions rather than simply opting for the cheapest option. This can lead to underinsurance or misunderstandings about the extent of their coverage and protection.
Moreover, inherited policies should be treated as opportunities for fresh, client-centric advice. Rather than simply continuing existing coverage, FSPs must conduct thorough risk assessments to ensure policies meet evolving client needs. If a policy is found to be lacking, this should be brought to the client’s attention.
3. Outcome 5: Product performance
FSPs play a crucial role in ensuring that short-term insurance products deliver on their promises to clients. A high rate of repudiated claims often signals product misalignment, inadequate advice or unclear and insufficient product information. To prevent this, FSPs must conduct due diligence on insurance providers, assessing their claims-paying reputation, policy clarity and overall service standards.
Additionally, FSPs should analyse their own claims data to determine whether repudiated claims point to gaps in their own business practices or processes. For example, frequent claim denials may indicate that clients were not adequately informed about the circumstances under which they are covered, highlighting the need for clearer explanations at the time of product acceptance.
4. Outcome 6: Access to benefits
Clients should experience a seamless claims process, free from unnecessary administrative hurdles. FSPs should proactively assist clients in understanding and meeting documentation requirements, ensuring fast, fair and transparent claims processing. Additionally, FSPs should be available to resolve queries, escalate legitimate concerns and advocate for clients when necessary. Implementing processes to track claims-related information can help FSPs identify and resolve issues or barriers in their claims management cycle. Data on turnaround times or recurring processing errors can provide valuable insights for FSPs, helping them to improve services and ensure client interests are prioritised.
By aligning claims handling with these TCF principles, FSPs can ensure compliance while enhancing client relationships and industry credibility.
Common Challenges in Claims Handling
- Late claim registration: Delays in reporting claims often lead to rejections. FSPs must track loss dates and remind clients to submit claims within the required time frame.
- Incomplete documentation: Missing paperwork prolongs claim processing. FSPs should proactively collect necessary documents at policy inception to prevent delays.
- Claim repudiations: When insurers reject claims due to exclusions or policy misunderstandings, clients become frustrated. Clear policy explanations upfront can manage expectations.
- Uninsured item claims: Clients sometimes attempt to claim for non-covered items, leading to disputes. Transparency about coverage limits is crucial.
- Frequent claims: Excessive claims can make a client uninsurable. Educating clients on the purpose of insurance – covering unforeseen risks rather than routine expenses – helps manage expectations.
- Communication gaps: Poor communication causes uncertainty. Regular claim status updates improve trust and reduce client anxiety.
- Dispute resolution issues: Handling rejected claims with transparency and assisting clients with formal complaints can strengthen client relationships.
- Staff inefficiencies: Late submissions and lack of claim tracking by staff can cause unnecessary delays. Regular training and standardised processes are essential.
Strategies for Overcoming These Challenges
1. Proactive documentation collection
FSPs should collect essential documents at policy inception. For instance, obtaining a gas compliance certificate in advance ensures smooth claims processing later.
2. Regular claims monitoring
A structured claims diary system helps track outstanding requirements and prevents delays. A well-maintained record serves as an audit trail and regulatory compliance safeguard.
3. Clear and regular communication
Using platforms like WhatsApp for document submissions and status updates enhances communication efficiency and reduces delays.
4. Leveraging technology for simplification
Digital claim forms accessible via smartphones streamline submissions, reducing paperwork and administrative inefficiencies. Partnering with insurers to integrate online tools accelerates claims processing.
5. Continuous staff training
Ongoing training ensures that staff members remain knowledgeable about claims procedures, regulatory requirements and product updates.
6. Standardised claims handling processes
Developing a standardised claims management system ensures consistency and improves efficiency.
7. Managing client expectations
Setting realistic expectations by under-promising and over-delivering helps maintain trust and minimises dissatisfaction when insurer decisions are unfavourable.
8. Partnering with reputable insurers
FSPs should collaborate with well-established insurance providers known for fair and prompt claims handling to mitigate risks associated with poor service.
Better Claims Handling Results in Better Business
A seamless, efficient claims process benefits both clients and FSPs:
- Higher client retention: A stress-free claims experience increases renewal rates and long-term loyalty.
- Positive referrals: Satisfied clients are more likely to recommend the FSP, leading to organic business growth.
- Operational efficiency: Streamlined claims processing reduces administrative burdens and enhances productivity.
- Stronger insurer relationships: Reliable claims handling fosters collaboration with insurers, potentially leading to preferential service for clients.
- Enhanced reputation: Consistently effective claims management establishes the FSP as a trusted industry leader.
Turning Claims Handling into a Competitive Advantage
Short-term claims handling represents a pivotal touchpoint in client relationships, where trust is reinforced or lost. By proactively addressing challenges, adhering to regulatory standards and leveraging technology, FSPs can turn claims handling into a competitive edge.
Clear communication, accurate documentation and ongoing staff training are key pillars of success.
A well-managed claims process not only resolves immediate client issues but also cultivates long-term trust and loyalty, positioning the FSP as a reliable, client-centric service provider in an increasingly competitive market.