COMPLAINTS: R.A.T.s (Reporting, Analyzing and Trending) Over time, the insurance industry has developed fairly effective methods of dealing with complaints. The aftermath of complaint logging, however, is still being improved. Additionally, regulators tend to look at complaints in specific ways, which are recommended to companies as Best Practices, for protection and preparation in Market Conduct Exams. Analyzing Complaints A practice common in the industry is to analyze complaints compared to numbers of sales. Breaking that data down further can benefit the company greatly. A. B. C. D. E. F. Complaints can be identified by product, and national comparisons made of numbers of complaints to product policies issued. Product complaints can then be examined by producer, to see if any particular producer has problems with product training, for instance. If the company has several divisions, perhaps with various distribution methods, an interesting comparison may be made between divisions as far as numbers of complaints to policies sold. This comparison may be used to align the other divisions more closely in terms of training and monitoring with the one that seems to have the best track record. Multiple line companies should look at complaints, by producer, in all combined lines. Don’t rely on the life division to consider life complaints while the P/C division looks at similar complaints by the same producer. Combine them to obtain the true picture. Product complaints should also be looked at by agency and/or by region to see if there is either a product training issue or a sales procedure issue. If a producer or agency has found a GREAT way to make the sale of this product, the word will spread and other producers and agencies may start using this sales procedure. The insurer has a duty to be aware of field sales methods, and if those methods are not ethical or are not compatible with the company culture, the insurer needs to act. Within a product, complaint ratios to face amounts might also provide the company good information. Are larger face amounts being sold more frequently without “reasonable” suitability? Are more complaints resulting from higher face amount sales? Does a variable annuity producer sell just one VA product? How likely is it that one product is a solution to every client’s needs? Trending Complaints How does your company look at complaints? Identifying trends is far more important than simply collecting data and reporting numbers. Trending can help identify issues before they become problems, can help correct internal procedures or field training gaps, and can encourage the company to continue improving its consumer reputation. A. B. C. D. E. F. G. If the company only looks at a month or a quarter at a time, even with four quarters looked at annually, consider instituting a look at a rolling quarter. That is, look at complaints every month for the previous three months. Many companies have determined a “high level” of complaints. Depending on the company’s average number of complaints, products and types of distribution, this magic number can vary all the way from 2 a year to 20 a year. The red flag number should never be published to the field. When used in conjunction with a rolling quarter, the high level threshold can be perceived differently. Rather than a producer getting to “start over” on the high level each quarter, the three-months roll. Then, if a producer seems to be skirting close to the threshold as the rolling quarters continue, past history may need to be reviewed. Companies have different responses to high numbers of complaints. Among the possibilities of action are: additional product training, additional sales training, verbal warning, written warning, heightened supervision, probation, up to and including termination. Also, some companies have instituted an ongoing review of incoming applications from those producers hitting the high level of complaints. While continuing to work to resolve the current complaints, the company takes proactive steps to head off additional complaints. This ongoing review may take into account requested exceptions, appropriate face amounts, appropriateness of replacements and field underwriting quality. If your company began recording telephoned complaints in the recent past, be sure not keep that in mind if total numbers of complaints appear to be on the upswing. That trend will level off over the period of two or three years. Reporting Complaints Companies are typically good about reporting numbers of complaints, or ratios of complaints compared to the last reporting period. For instance, in 2005 complaints were at X number for the first quarter, compared to X in the first quarter of 2004. Consider establishing reports in line with regulator expectations if not already being done. A. B. It may seem obvious to say, but be sure to protect the company from future Market Conduct Exam penalties by paying attention to past penalties. In terms of complaints, this may mean revising reports, report formats or reporting methodology to meet the requirements of that last Examiner. Unless the requirement is onerous, applying those changes in all states will be easier for staff to maintain and monitor in the long run. Applying those changes across product lines may make sense in terms of risk or ethics or Best Practices, as well. Reward what you really want. At least one company rewards the Customer Service/Complaint Department for closed complaints each month. In order C. D. E. to achieve the most closed complaints, however, the customer service reps tend to mark a file “closed” when their first response goes to the consumer. Since there is frequently the need to re-open those closed files, the lesson seems clear. Establishing a waiting period (14 days? 30 days?) after the letter goes out for the consumer to respond or object, and applying the waiting period consistently, can shift the emphasis from closing the file to resolving the complaint to the satisfaction of the consumer. For life insurance products, look at numbers of replacement by producer by product line. This is a report regulators in Model Replacement States are allowed to request. There isn’t a state-mandated “high level” percentage that we’re aware of. However, the company should establish a trigger point (in all states, not just Model States) for increased review of replacements. Keeping in mind that every replacement could be a good one, or no replacement is a necessarily a good one. In reports to management, make sure that trends are noted and explained, as appropriate, and any disciplinary action taken is also reported. One of the most overlooked Best Practices in reporting complaints is to tag and compare the “justified” complaints against the total. Justified complaints are those in which a root cause for the complaint is identified (a policy issue procedure or producer training practice, for instance) and a change is made by the company, either to ongoing processes or to satisfy the customer because a legitimate error was made. Unjustified complaints are those that cannot be helped. For example, a drop in interest rates for participating or variable policies can trigger a number of complaints, but there’s nothing the company can or will do to change. Likewise, a necessary increase in a health premium because of claims is usually followed by an increase in complaint. However, these are unavoidable complaints and should not be considered justified, although they are legitimate on the part of the customers. By tagging complaints in these two categories, what seem to be upswings in numbers of complaints may turn out to be a lower number of complaints that have a reasonable basis. Starting with the base line of regulatory requirements, it seems that most companies make a “good faith” effort to resolve complaints and to reduce the causes for complaints. Some of the above practices may help your company continue its quest for lower complaint numbers and ratios, and for a greater number of satisfied customers in the long run.