A dashboard for fairness
How banks and insurance companies can use data to ensure greater fairness for their customers
Banks and insurers are assessing their regulatory risks in the wake of Australia’s Hayne Commission. They’re looking for ways to validate that they have not mis-sold policies or treated customers unfairly. It’s not enough to just say this isn’t a problem here. New Zealand's institutions are looking for evidence to back this up and Deloitte’s experts on conduct talk about some of the related issues. Bernard Hickey reports.
This article originally appeared in Newsroom
The Australian inquiry has uncovered instances of mis-selling and overcharging by banks and insurers there, including loans and insurance policies to people who couldn’t afford them, and even to people who were dead. Some paid fees for services they didn’t receive and the Hayne Commission has uncovered a series of governance failures that could have been avoided.
Across the ditch, there are situations where directors and executives have resigned and been fired. In cases, insurers and banks have been forced to sell assets and raise capital,investors are downright angry, share prices have slumped and customers are rightly questioning whether they’ve been taken for a ride.
Unfortunately, identifying these issues after the fact and during a Royal Commission is the worst place to be for all concerned – directors, executives and customers.
If only there had been a series of warning lights to better identify issues and change settings earlier for the impacted organisations.
Deloitte Partner Catherine Waugh says banks and insurers have the data points to manage their conduct and do the right thing by their customers first, and keep out of the regulators’ firing line; and the better ones are.
It will never be perfect or foolproof, but they just need to pick the right ones. Some are building multi-dimensional dashboards that helps them see what they may have missed, and what may be coming over the horizon, so they can correct course.
“When you bring all these bits together you get a far richer picture,” Waugh says.
“Make no mistake, all of these institutions have this data in spades. The art is now to more overtly bring it together in a comprehensive fashion given the amount at stake,” she says.
The dials and lights on the dashboard
Waugh says many banks and insurers are taking a variety of their key leading and lagging indicators to build a multi-dimensional view aimed at better finding out where problems might be developing.
Picking on one, such as complaints, can give a misleading impression, given many customers aren’t willing or able to go through the sometimes arduous complaint process, or have yet to understand there is a problem.
“It’s not a one-dimensional issue so therefore you need a number of different lenses to look through to ensure that you’ve got it under control,” Waugh says.
“Do your people conduct themselves in a way that delivers fair outcomes for customers? How do you know when there’s nobody looking that your staff are doing the right thing?”
People, product and channel
The leading and lagging indicators for the dials on the dashboard focus on three areas - the bank or insurer’s people, its products and its distribution channels.
The people side starts with recruiting and training, and then measuring and monitoring, including whether the staff selling the products engaged with the training are following the policies. Then there’s the remuneration and incentives. Are all those elements coming together in a way that reinforces that customers must be treated fairly.
Then there’s the products themselves. Is a product designed in the right way? Is the pricing fair? Are they wanting to switch? Are customers terminating policies during cooling off periods? Where are the spikes in early terminations? In the branch? Which branches? Or is it online?
Deloitte Director for Risk Advisory Roopa Raj says that it’s the leading indicators that are often a better way of understanding when a problem might be developing – a sort of ‘heads up’ display for directors and executives.
“Don’t just look at your complaints. Look at your inquiries data,” Raj says.
“It may be a problem, but the customer doesn’t know it yet.”
Another way to check whether the various moving parts are working together to treat customers fairly is to do mystery shopping, whether it’s through opening an account or applying for a policy through a branch, or doing it online.
Culture eats everything for lunch
Ultimately any dashboard is only as good as the culture of the organisation, although there are ways to measure that too, and spot problems before they emerge.
Exit interviews are one measure, along with finding which branches and divisions have high turnover or incidences of harassment, bullying and staff complaints.
But at the end of the day (before the regulator calls) the responsibility falls with directors and executives, says Waugh.
“If you’re an executive or on the board of these institutions, the question you should be asking is how do I know that what we’re offering is actually fair, and where’s the data that gives me comfort that we have done everything reasonable to ensure that it is,” she says.
“That’s what we want boards and management to ask: show me the data. Don’t just tell me it’s okay, or that we don’t get any complaints.”
But irrespective of any processes put in place and tools deployed, issues can still arise. This is particularly so for larger organisations given their scale.
“Heightened management in this area is in everyone’s interest, to ensure our institutions retain the trust and confidence they have built.”