The Citizen (Gauteng)

Momentum issue: questions arising

FINDING BALANCE: WHAT IS FAIR AND WHO DECIDES?

- Patrick Cairns

Critical factor is that, broadly, there’s consistent improvemen­t in outcomes.

secondly, what might be fair to you is completely unfair to someone else, given their personal circumstan­ces.”

Fairness indicators

Sometimes fairness isn’t clearcut. For example, if a firm only accepts claims by e-mail that may be acceptable to anyone with internet access, but how does a rural client with no data get what’s due to them? Fairness is thus not the same as uniformity.

Financial Sector Conduct Authority’s Leanne Jackson says it means treating people in line with the expectatio­ns you’ve created, which leads to a fair outcome for them. “The way we approached it is to say let’s not focus on trying to define what is fair and what isn’t … let’s rather focus on the outcomes we would like to see that are indicators of fairness.”

Financial services providers are therefore expected to show how they work to ensure what they deliver to clients is fair, and that they constantly re-evaluate this.

Underwriti­ng fairness

This becomes interestin­g in the insurance world, where underwriti­ng is so important. Every insurer must base its underwriti­ng decisions on something, but what’s fair to use, and what isn’t?

“On the one hand you have insurers looking to do finer underwriti­ng and finer pricing – looking at as much data as they can to get the most accurate risk pricing possible,” says David Kirk at Milliman.

“But whether the end result is the best thing for society, for the market or the insurance industry is an interestin­g question.”

For instance, is it fair for insurers to base underwriti­ng decisions on factors outside of an individual’s control? In a recent survey Kirk found most actuaries said no. But when asked whether it was fair to use sex or genetics, they felt it was. This is a contradict­ion, and a challenge for the industry. Kirk believes companies that focus the most on being fair to clients, and therefore exclude these factors from their screening, may find themselves at a competitiv­e disadvanta­ge.

More prescripti­ve

There may still be areas where the regulator has to set down clear rules to protect the industry and clients. Financial services providers cannot be expected to be absolutely fair in every case. The critical factor is that, broadly, there’s consistent improvemen­t in the outcomes for clients.

Newspapers in English

Newspapers from South Africa