IFRS

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IFRS
Bill Hannan, Group Head of
Compliance Risk Policy , Irish Life
Joe Grogan, CEO, Marsh Ireland The Consumer
Protection Code Strategic Implications For
Intermediaries
2008 Rising to the Challenge
The Insurance Institute of Ireland, Wednesday
26th November 2008 Ballsbridge Court Hotel
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Consumer Protection Code Strategic Implications
for Intermediaries
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Bill Hannan

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The Financial Regulators Role
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The Financial Regulator has been a driver of
  significant change in the financial services
  market.
• This arises from the Financial Regulators role,
  which is to help consumers make informed
  financial decisions in a safe and fair market.
• The greatly increased emphasis on fair
  represents a major departure from the roles of
  previous regulators.

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The Consumer Director
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The office of Consumer Director in the Financial
  Regulator is the manifestation of this change.
• This role, and the obligations attaching to it,
  have resulted in significant change in the
  relationships between financial services firms
  and consumers.
• The Consumer Protection Code reflects this
  change, but so also do the Minimum Competency
  Requirements and the various cost surveys and
  advertising campaigns.

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1st Annual CPD Conference 2008 Treating the
Customer Responsibly
The New Era

• The Consumer Protection Code is the main
  manifestation of a new era in financial services
  regulation.
• The move to the new era has been an ongoing
  process.
• Much of the Consumer Protection Code is the
  extension to all, or most, sectors of
  requirements previously put in place in specific
  sectors.
• To that extent, the introduction of the Consumer
  Protection Code represents the end of the
  beginning, rather than the beginning, of the new
  era.

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The New Era
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Previous codes and handbooks leading to the
  Consumer Protection Code include
• Handbook for Authorised Advisors and Handbook for
  Restricted Activity Investment Product
  Intermediaries 2001
• Code of Conduct for the Investment Business
  Services of Credit Institutions - 2001 and
• Interim Code of Practice for Insurance
  Undertakings 2003.
• Mortgage intermediaries are now also subject to
  terms of business / knowing the customer /
  suitability requirements.

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Consumer Protection Code
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The General Principles of the Consumer Protection
  Code came into effect on 1 August 2006.
• Some specified provisions of the Code came into
  effect on 31 August 2006.
• The Code came into full effect on 1 July 2007.
• The full implementation of the Consumer
  Protection Code means that the transition phase
  is over we are now in a time where processes
  and procedures must fully meet the requirements
  of the Consumer Protection Code.

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Consumer Protection Code
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The Consumer Protection Code consists of
• 12 General Principles and
• 178 Rules.
• The Consumer Protection Code Rules have been
  supplemented by Dear Chief Executive letters.
• The General Principles set out the fundamental
  requirements of the Consumer Protection Code
  the Rules supplement the General Principles in
  specific circumstances.
• There are two broad themes underlying the General
  Principles
• requirements in relation to the sales / advice
  process and
• requirements in relation to skills, resources and
  customer service.

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Consumer Protection Code General Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Acts honestly, fairly and professionally in the
  best interests of its customers and the integrity
  of the market
• Acts with due skill, care and diligence in the
  best interests of its customers
• Does not recklessly, negligently or deliberately
  mislead a customer as to the real or perceived
  advantages or disadvantages of any product or
  service
• Has and employs effectively the resources and
  procedures, systems and control checks that are
  necessary for compliance with this Code
• Seeks from its customers information relevant to
  the product or service requested
• Makes full disclosure of all relevant material
  information, including all charges, in a way that
  seeks to inform the customer

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Consumer Protection Code General Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Seeks to avoid conflicts of interest
• Corrects errors and handles complaints speedily,
  efficiently and fairly
• Does not exert undue pressure or undue influence
  on a customer
• Ensures that any outsourced activity complies
  with the requirements of this Code
• Without prejudice to the pursuit of its
  legitimate commercial aims, does not, through its
  policies, procedures, or working practices,
  prevent access to basic financial services
• Complies with the letter and spirit of the Code

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Sales / Advice Process General Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• acts honestly, fairly and professionally in the
  best interests of its customers
• does not recklessly, negligently or deliberately
  mislead a customer
• seeks from its customers information relevant to
  the product or service requested
• makes full disclosure of all relevant material
  information, including all charges
• seeks to avoid conflicts of interest
• does not exert undue pressure or undue influence
  on a customer

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Sales / Advice Process General Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• These are demanding standards.
• The key underlying requirements are to act in
  the best interests of customers, to make full
  disclosure of all relevant material information
  and to seek to avoid conflicts of interest.
• Essentially, an adviser is required to put the
  interests of the client in primary position, and
  to arrange matters to be consistent with this.

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Caveat Emptor
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The principle of Caveat Emptor traditionally
  governed the relationship between sellers and
  buyers.
• This did not allow unconstrained behaviour on the
  part of sellers.
• It required honest representations and fair
  dealings.
• But buyers were responsible for managing their
  own interests that was not the duty of sellers.

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In The Best Interest Of Customers
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The principle of Caveat Emptor has been replaced
  (or supplemented), in the case of financial
  services, by the principle of acting in the best
  interest of customers.
• This fundamentally changes the relationship
  between financial services firms and their
  customers.
• Financial services firms now have defined
  responsibilities in relation to looking after the
  interests of customers.
• The relationship between financial services firms
  and their customers is now akin to that between
  professional advisers (such as doctors,
  accountants or solicitors) and their clients.

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1st Annual CPD Conference 2008 Treating the
Customer Responsibly
In The Best Interest Of Customers

• The key features of this relationship are
  reflected in the requirements in relation to
• Terms of business
• Knowing the consumer and
• Suitability (and, in particular, the most
  suitable requirement).
• This way of doing business did exist before the
  current regulatory structures came into place.
• But that would have reflected business strategy,
  and other strategies gave rise to different ways
  of doing business.
• Now there is no option in regard to the strategy
  to be followed in relation to the nature of the
  customer relationship.

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Skills, Resources and Customer Service General
Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• acts with due skill, care and diligence in the
  best interests of its customers
• has and employs effectively the resources and
  procedures, systems and control checks that are
  necessary for compliance with this Code
• corrects errors and handles complaints speedily,
  efficiently and fairly
• ensures that any outsourced activity complies
  with the requirements of this Code

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Skills, Resources and Customer Service General
Principles
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• These are also demanding standards
• The key underlying requirements are to act with
  due skill, care and diligence, to have the
  resources necessary for compliance with the
  Code, and to correct errors and handle
  complaints speedily, efficiently and fairly
• Essentially, the firm is required to have the
  full range of human and other resources required
  to meet the requirements of the Consumer
  Protection Code and to have minimum standards of
  customer service

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Consumer Protection Code
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The Consumer Protection Code has set precise and
  demanding standards in relation to two broad
  areas
• the Sales / Advice process and
• Skills, Resources and Customer Service.
• Meeting these standards is the key challenge
  arising from the Consumer Protection Code.

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Consumer Protection Code Strategic Implications
for Intermediaries
1st Annual CPD Conference 2008 Treating the
Customer Responsibly
Joe Grogan, CEO Marsh Ireland Ltd.
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Aims of the Code
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• CPC aims to apply the same standards regardless
  of the type of financial services provider
• CPC aims to ensure a consumer-focused standard
  of protection
• CPC is a legally binding document with general
  principles supplemented by more detailed rules by
  sector. Administrative Sanctions may be imposed
  by the FR for breaches
• CPC distinguishes between customer and
  consumer
• Many large firms have decided to apply rules to
  all clients

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High Level Summary of Common Rules for All
Regulated Entities
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Find out as much as you need to know about the
  customer
• Offer a suitable product
• Explain why it is suitable
• If problems arise, deal with them in an open and
  fair manner
• Retain records to demonstrate compliance with the
  CPC to the Financial Regulator
• Provision of information should be accompanied by
  suitable explanations

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Best Practice
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• The case for segmentation Consumer v Non Consumer
• Establishment of formal compliance and legal
  regimes
• Educate staff formal training and the intranet
• The role of HR, Training and induction
  programmes.
• Support of QFA, CIP, CPD
• MIS What gets measured, gets done

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Focus on Complaints Handling
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Handling of Consumer complaints is a key element
  of Code, very important to FR
• FR Effectiveness of Complaints Procedure is
  paramount in determining the overall
  effectiveness of consumer protection Creating
  an awareness of Complaints Procedure benefits
  both firm customer
• General Principle 8 correct errors and handle
  complaints speedily, efficiently and fairly
  (Note the principle applies to all customers,
  not just consumers)
• Firms must have written Complaints Procedure in
  place
• Verbal complaints must be treated in the same way
  as written complaints
• Up-to-date records of all complaints must be
  maintained

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Focus on Complaints Handling contd.
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• FRs goals in relation to complaints handling
  are
• Speedy initial engagement
• Personal touch
• Customer kept informed
• Customer informed of options if not satisfied
• Does your firms Complaints Procedure satisfy the
  Codes requirements and these goals?
• Have you tailored your firms Complaints
  Procedure according to your firms needs?
• E.G. Does your firm have business units where
  complaints are more likely due to the customer
  profile or the type of business involved?
• If so, how have you adapted your Complaints
  Procedure to take account of this?

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Complaints as Management Information Tool
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• FR is aware that complaints are an important
  management information tool for firms
• FR has stated that some firms, while resolving
  individual complaints, do not utilise the
  information provided
• Is your firm using the information from
  complaints? Are internal procedures amended in
  light of trends/issues identified through
  complaints?
• The Code only sets the minimum standard

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Educational Requirements
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Minimum Competency QFA CIP
• Basic Standards v Professional Excellence
• Continual Professional Development
• Individual Responsibility Company
  Responsibility
• The Challenge of Grand Fathered individuals

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Summary of CPD
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Continual Learning Upskilling
• Planned 3 year cycle, 60 hours
• Minimum 15 hours per calendar year (10 formal
  hours)
• Life Industry QFA Board
• General Industry PSAB GI
• LIA, III Fundamental Educational Support

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Benefits / Challenges
1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• Customer satisfaction / Service excellence
• Strong Professional Organisations
• Compliance within the DNA of the Organisation
• Reduction in Errors Omissions and Mis-selling
• Weakest link in your organisation
• How to cope with the aggregation or regulatory
  and legal activity

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1st Annual CPD Conference 2008 Treating the
Customer Responsibly

• QUESTIONS ANSWERS