The supervisor should require insurers and intermediaries to have policies and processes in place to achieve this outcome, including taking appropriate measures to ensure that their employees and agents meet high standards of ethics and integrity.  

Supervisors should require insurers and intermediaries to have policies and processes in place to achieve the fair treatment of customers and should monitor whether such policies and processes are adhered to.

Proper policies and processes dealing with the fair treatment of customers are likely to be particularly important with respect to retail customers, because of the greater asymmetry of information that tends to exist between the insurer or intermediary and the individual retail customer.   

Supervisory requirements with respect to fair treatment of customers may vary depending on the legal framework in place in a particular jurisdiction. The desired outcome of fair treatment of customers may be achieved through a variety of approaches, with some jurisdictions favouring a principles-based set of requirements, some favouring a rules-based approach, and others following some combination of approaches.  

• Strategy: Fair treatment of customers should be an objective taken into consideration in the design of the business strategy, product design, product distribution, and product performance.
• Leadership: Overall responsibility for fair treatment of customers should be at the level of the Board and Senior Management, who should design, implement, and monitor adherence to, policies and processes aimed at ensuring that customers are treated fairly. This sets the tone for the business.
• Decision making: All decisions that impact on customers should be subject to particular scrutiny in terms of whether they support the fair treatment of customers.
• Internal controls: Monitoring the fair treatment of customers requires relevant management information to be identified, collected and evaluated. Internal reports should include the most useful information and indicators to allow the Board and Senior Management to measure the insurer’s or intermediary’s performance with respect to fair treatment of customers. Mechanisms and controls should be established to ensure that departures from policies and processes as well as other situations that jeopardise the interests of customers, are promptly remedied.  
• Performance management: Appropriate attention should be paid to the recruitment of staff and agents who meet high standards of ethics and integrity. Relevant staff should be trained to deliver appropriate outcomes in terms of fair treatment of customers. Evaluation of performance should include the contribution made to achieving these outcomes. There should be appropriate performance management consequences for staff who fail to meet these standards.
• Reward: Remuneration and reward strategies should take account of the fair treatment of customers. Reward structures need to reflect quality issues and not encourage or reward the unfair treatment of customers. Remuneration structures that create conflicts of interest may lead to poor customer outcomes.

Insurers’ and intermediaries’ strategies, policies and processes dealing with the fair treatment of customers should be made available to the supervisor. The supervisor should encourage insurers and intermediaries to make relevant policies and processes publicly available as good practice, in particular their claims handling, complaints handling and dispute resolution policies and processes.   

Advice goes beyond the provision of product information and relates specifically to the provision of a personalised recommendation on a product in relation to the disclosed needs of the customer.  

The insurer or the intermediary should make it clear to the customer whether advice is provided or not. 

• financial knowledge and experience;
• needs, priorities and circumstances;
• ability to afford the product; and
• risk profile.

The supervisor may wish to specify particular types of policies or customers for which advice is not required to be given. Typically, this may include simple to understand products, products sold to customer groups that have expert knowledge of the type of product or, where relevant, mandated coverage for which there are no options. Even if no advice is given the supervisor may require the insurer or intermediary to take into account the nature of the product and the customer’s disclosed circumstances and demands and needs. 

In cases where advice would normally be expected, such as complex or investment-related products, and the customer chooses not to receive advice, it is advisable that the insurer or intermediary retains an acknowledgment by the customer to this effect.  

The basis on which a recommendation is made should be explained and documented, particularly in the case of complex products and products with an investment element. All advice should be communicated in a clear and accurate manner, comprehensible to the customer. Where advice is provided, this should be communicated to the customer in written format, on paper or in a durable and accessible medium, and a record kept in a “client file”.  

The insurer or intermediary should retain sufficient documentation to demonstrate that the advice provided was appropriate, taking into account the customer’s disclosed circumstances. 

In addition, insurers and intermediaries should review the “client files” of those under their responsibility to exercise control after the fact on the quality of the advice given, take any necessary remedial measures with respect to the delivery of advice and, if applicable, be in a position to examine fairly any complaints submitted to it. 

• keep abreast of market trends, economic conditions, innovations and modifications made to the products and services;
• maintain an appropriate level of knowledge about their industry segment, including the characteristics and risks of the products and services;
• know the applicable legal and regulatory requirements;
• know the requirements for the communication of information regarding the products and services and for appropriate disclosure of any situation liable to compromise the impartiality of the advice given or limit such advice; and
• be familiar with the documentation regarding the products and services and answer reasonably foreseeable questions.

For the purposes of this standard, “policyholder” refers only to the party to whom a contract of insurance is issued by an insurer (as opposed to the broader IAIS definition). 

Supervisors should require insurers to satisfy obligations under a policy in an appropriate manner and in accordance with the contractually agreed terms and legal provisions. This should include fair treatment in the case of switching between products or early cancellation of a policy. To enable them to do so, insurers should maintain a relationship with the customer throughout the policy lifecycle.  

Although ongoing policy servicing is traditionally seen as primarily the responsibility of the insurer, intermediaries are often involved, particularly where there is an ongoing relationship between the customer and the intermediary. The insurer should remain ultimately responsible for servicing policies throughout their life-cycle, and ensuring that intermediaries have appropriate policies and processes in place in respect of the policy servicing activities that they perform on the insurer’s behalf.  

Policy servicing includes the provision of relevant information to customers throughout the life of the policy. 

• any change in the name of the insurer, its legal form or the address of its head office and any other offices as appropriate;
• any acquisition by another undertaking resulting in organisational changes as far as the policyholder is concerned; and
• where applicable, information on a portfolio transfer (including policyholders’ rights in this regard).

Insurers should provide evidence of cover (including policy inclusions and exclusions) promptly after inception of a policy. 

• main features of the insurance benefits, in particular details on the nature, scope and due-dates of benefits payable by the insurer;
• the total cost of the policy, expressed appropriately for the type of policy, including all taxes and other cost components; premiums should be stated individually if the insurance relationship comprises several independent insurance contracts or, if the exact cost cannot be provided, information provided on its basis of calculation to enable the policyholder to verify the cost; 
• any changes to the cost structure, if applicable, stating the total amount payable and any possible additional taxes, fees and costs not levied via or charged by the insurer, as well as any costs incurred by the policyholder for the use of communication methods if such additional costs are chargeable;
• duration of the contract, terms and conditions for (early) termination of the contract and contractual consequences;
• means of payment of premiums and duration of payments;
• premiums for each benefit, both main benefits and supplementary benefits;
• information to the policyholder about the need to report depreciation/appreciation;
• information to the policyholder about other unique circumstances related to the contract;
• information on the impact of a switch option of an insurance contract;
• information on a renewal of the contract; and
• information on the ongoing suitability of the product, if such a service is provided by the insurer or intermediary.

• participation rights in surplus funds;
• the basis of calculation and state of bonuses;
• the current surrender value;
• premiums paid to date; and
• for unit-linked life insurance, a report from the investment firm (including performance of underlying funds, changes of investments, investment strategy, number and value of the units and movements during the past year, administration fees, taxes, charges and current status of the account of the contract).

Where there are changes in terms and conditions, the insurer should notify the policyholder of their rights and obligations regarding such changes and obtain the policyholder’s consent as appropriate. 

Supervisors should require that insurers have fair and transparent claims handling and claims dispute resolution policies and processes in place. 

Insurers should maintain written documentation on their claims handling procedures, which include all steps from the claim being raised to its settlement. Such documentation may include expected timeframes for these steps, which might be extended in exceptional cases. 

Claimants should be informed about procedures, formalities and common timeframes for claims settlement. 

Claimants should be given information about the status of their claim in a timely and fair manner. 

Claim-determinative factors such as depreciations, discounting or negligence should be illustrated and explained in comprehensive language to claimants. The same applies where claims are denied in whole or in part. 

Sometimes intermediaries serve as an initial contact for claimants, which may be in the common interest of the policyholder, intermediary and insurer. 

A fair claims assessment process requires avoidance of conflicts of interest, as well as appropriate competence and ongoing training of the staff involved. 

Competence requirements for claims assessment differ depending on the type of insurance policy and generally include technical and legal expertise. 

In the course of claims settlement, a dispute may arise between the claimant and the insurer on the claims settlement amount, or coverage. Staff handling claims disputes should be experienced in claims handling and be appropriately qualified.  

Dispute resolution procedures should follow a balanced and impartial approach, bearing in mind the legitimate interests of all parties involved. Procedures should avoid being overly complicated, such as having burdensome paperwork requirements. Decisions should include the reasoning in clear language relating closely to the specific disputable issues.  

Supervisors may encourage insurers to have mechanisms in place to review claims disputes within the insurer to promote fair play and objectivity in the decisions. 

If any of the claims handling processes are outsourced in part or in full, then supervisors should require insurers to maintain close oversight and ultimate responsibility for the provision of fair and transparent claims handling and claims dispute resolution. 

Insurers and intermediaries collect, hold, use or communicate to third parties information on their customers in the course of their business. It is important that they have in place policies and processes on the appropriate use and, in the case of personal information, the privacy of such data. 

Significant amounts of the information collected, held or processed represent customers’ financial, medical and other personal information. Security over such information is extremely important, regardless of the format of the information (eg whether physical or electronic). Hence safeguarding personal information on customers is one of the key responsibilities of the financial services industry. 

Legislation identifies the provisions relating to privacy protection under which insurers and intermediaries are allowed to collect, hold, use or communicate personal information on customers to third parties. Generally, the legislation also identifies who is the competent authority. 

Although data protection laws vary from jurisdiction to jurisdiction, insurers and intermediaries should have a clear responsibility to provide their customers with a level of comfort regarding the security of their personal information.

• ensuring that the Board and Senior Management are aware of the challenges relating to protecting the privacy of personal information on customers;
• demonstrating that privacy protection is part of the organisation’s culture and strategy, through measures such as training to employees that promotes awareness of internal and external requirements on this subject;
• implementing policies, procedures and internal control mechanisms that support the objectives of protecting the privacy of personal information on customers and assess the risks associated with potential failure to protect the privacy of personal information;
• assessing the potential impact of new and emerging risks that could threaten the privacy of personal information, such as the risk of cyber attacks, and taking appropriate steps to mitigate these through measures such as internal controls, technology and training; and
• determining the response measures that may be needed where a failure to protect the privacy of personal information occurs, including matters such as timely notification to affected customers and competent authorities.

Insurers and intermediaries use personal and other information on customers for a variety of purposes within the course of business that include, amongst other things, product development, marketing, product pricing, and claims management. 

Insurers and intermediaries should be aware of outsourcing risk, especially when the outsourcing agreement is reached with firms in another jurisdiction. Insurers and intermediaries should ensure that the firms to which they outsource processes have adequate policies and processes in place for the protection and use of private information on customers they have in their records.  

All the necessary data required in the event of restructuring, resolution and liquidation should, subject to data protection requirements, be accessible and readable at the insurer’s or intermediary’s domicile at any time. This includes all customer-related data, such as claims and policy data.