New Internal Dispute Resolution requirements (RG 271) - what are the key take outs and considerations for insurers?
ASIC released its new Regulatory Guide (RG 271) on complaints handling and dispute resolution standards and requirements, on 30 June 2020. The new RG 271 guide will replace the existing RG 165 guidance and will take effect for complaints received on or after 5 October 2021. In the meantime the current guidance will prevail as financial services firms work to implement system, procedural and resource changes to meet the revised dispute framework. It is expected that ASIC will consult further on the IDR data collection and reporting requirements of the new complaints regime in the last quarter of 2020.
The revised guide is intended to deliver improved outcomes for consumers by ensuring that complaints are resolved in a fair, timely and effective manner and reducing the need to escalate complaints to external dispute resolution. The new guidance attempts to balance the needs of complainants and financial services firms by ensuring that the standards are both achievable and practical.
That is not to say that financial services firms can take the IDR obligations lightly. Certain key standards and guidance in the guide are enforceable provisions, and these demonstrate that ASIC intends to hold financial services firms accountable where they fail to deal with complaints in an appropriate manner or where they deliver poor consumer-outcomes. Failing to meet the RG 271 obligations may even be considered a breach of the Australian Financial Services Licence condition to comply with all applicable financial service laws and regulations.
The new regulatory guide (RG 271) includes the following key changes:
Broader definition of complaints
A complaint is defined as an expression of dissatisfaction made to or about an organisation, in relation to its products, services, staff or the handling of a complaint. RG 271 contains guidance in relation to social media posts as expressions of dissatisfaction will help financial firms determine what is in the definitional scope. In the social media setting a comment is deemed to be a “complaint” if the comment is posted on an account or media channel owned by the financial firm, where the author of the post is identifiable and contactable.
Reduced maximum timeframes for responding to complaints
The maximum timeframe to respond to standard complaints will be no later than 30 calendar days after receiving the complaint (a reduction from the existing 45 days). These changes are designed to improve customer outcomes by reducing complaint handling delays by providing fair, timely and efficient resolution of complaints for customers.
In addition ASIC expects firms to provide an acknowledgement of a complaint verbally or in writing (email, post or social media channels) within 24 hours or one business day of receiving it, or as soon as practicable (this is not an enforceable requirement).
Exceptions to the maximum timeframe
The circumstances where firms are not required to provide a response within the maximum IDR timeframes are:
- Where there is no “reasonable opportunity” to provide the IDR response;
- Due to the complexity of the complaint; and/or
- If there are circumstances beyond the firm’s control that are causing the delays.
In these instances the firm must provide the complainant with an “IDR delay notification” before the maximum timeframe expires.
New resourcing requirements
There is an obligation for firms to ensure that there is adequate resourcing in place to ensure that the IDR process operates fairly, effectively and efficiently within the prescribed maximum timeframes. There is an added requirement for firms to regularly review ongoing resourcing requirements and to ensure that staff resourcing takes into account any spikes in complaint volumes. This means you may need to consider providing training to all staff members (so that any staff member can action complaints) or provide detailed policies and procedures.
Provides guidance on the identification and management of systemic issues
Complaints serve as a key risk indicator for systemic issues warranting early identification and resolution, to not only avert matters from being escalated to AFCA, but to also avoid further harm /detriment to more customers.
Boards have the responsibility to set clear accountabilities for complaint handling functions as well as the identification and management of system issues, including robust systems to enable systemic issues to be investigated, followed up and reported on. Reports provided to board and executive committee must include metrics and analysis of consumer complaints and include systemic issues identified.
All staff should understand their roles and responsibilities in relation to the IDR process.
Minimum requirements for written IDR responses
A written IDR response to the complainant confirming the final IDR outcome must include enough detail for the complainant to understand the basis of the decision and to be fully informed when deciding whether to escalate the matter to AFCA or another forum.
The written response will need to include the following:
- Final outcome of the complaint, including details of any actions taken to resolve the complaint;
- Reasons for the outcome, if the complaint was rejected in part or in full, including details of findings and the basis of the decision; and
- Complainant’s right to take the matter to AFCA and the contact details for AFCA.
A written IDR response must always be provided if the complaint is about;
- A declined insurance claim or the value of an insurance claim; or
- The complainant requests a written response.
Fostering a proactive complaint handling culture
Firms are encouraged to adopt an organisation-wide approach to complaint management and to promote a culture that values complaints and is highly receptive to customer feedback. A complaint should be viewed as an opportunity, not a negative. It is expected that Board members, chief officers and senior management take an active interest in the proactive management of complaints, and will have specific responsibilities, to include:
- Oversight of the IDR process;
- Ensure that adequate resources, training and upskilling is provided to staff managing complaints;
- Champion the complaint management policy across the organisation;
- Ensure that there are effective systems and reporting procedures to enable the timeliness and effectiveness of complaint management and monitoring practices; and
- Establish clear roles and responsibilities for the management of complaints.
Beyond the Boardroom
Firms are also expected to ensure that their people demonstrate the right values, behaviours and attitudes towards complaints. This will underpin a philosophical approach to complaint handling that goes beyond adherence to a set of guidelines, checklists or timeframes. It’s about delivering respectful, user friendly and transparent practices that support the early resolution of complaints and reduce the need to escalate to external dispute resolution, and creating an environment and culture where it is safe for staff to escalate potential systemic issues before they turn into seismic issues will be essential.
The new IDR framework will further serve to elevate the importance of complaints in shaping the firm’s response mechanism as the impetus for continuous improvement, with complaint trends identified and root causes well understood. Firms have the opportunity to further harness customer insights derived from complaint data and analysis to tackle long standing pain points and customer irritants and drive continuous improvement, help shape product design, and improve service delivery across the value change.
Effective complaints management practices can help power continuous improvement and innovation.
Adopting changes to meet IDR requirements
Financial firms have between now and October 2021 to implement a range of measures in preparation for the new complaint handling requirements under RG 271. This will include the need to establish clear lines of accountability and reporting (if not already in place), develop processes and systems and upskill staff to deal with complaints in a fair, effective way.
For many financial firms the changes to the timeframes will require making some improvements to business processes, addressing process weaknesses to ensure that complaints can be resolved promptly and efficiently and strengthening governance around the capture, tracking, analysis and reporting of complaint data.
In addition, financial firms will need to bolster resources for their IDR functions to ensure that ongoing commitments to the revised maximum IDR timeframes can be met. Firms should also use the time to review and update complaint correspondence and templates to ensure that they satisfy the new requirements and enhance the quality of written communication and IDR responses. They should also review their complaints register to tackle customer irritants at the source.
The revised IDR guidance is the key to delivering better outcomes for consumers and reducing the need to escalate complaints to external dispute resolution. It’s now up to firms to embrace these reforms in order to deliver improved outcomes for their customers and leverage the insights gained to power continuous improvement opportunities.
ASIC intends to shortly commence its second phase of targeted consultation on IDR data collection and reporting. This consultation will build on the feedback that industry and consumer stakeholders provided in response to Consultation Paper 311 Internal dispute resolution: Update to RG 165.
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