Mastering short-term claims handling: A guide for FSPs

The short-term claims process is often where FSPs truly prove their worth. While selling a policy is relatively straightforward, managing claims effectively – ensuring a smooth and fair claims process – sets competent FSPs apart. Policyholders rely on their FSPs for guidance during losses – and delays, poor communication or inefficiencies can quickly erode trust, leading to reputational damage and regulatory scrutiny.

Regulatory and TCF obligations 

Short-term claims handling is classified as an intermediary service under the Financial Advisory and Intermediary Services (FAIS) Act. The Treating Customers Fairly (TCF) principles, embedded in the FAIS General Code of Conduct, ensure that FSPs act in the best interest of their clients. Additionally, the Policyholder Protection Rules (PPRs) under the Short-Term Insurance Act 53 of 1998 reinforce TCF principles by mandating fair treatment throughout the policy lifecycle, particularly during claims processing.

Regulators, including the Financial Sector Conduct Authority (FSCA), require FSPs to implement TCF in their claims processes to guarantee efficient service, clear communication and fair resolutions. Compliance with TCF is not merely a compliance aspect; it reflects an FSP’s dedication to ethical business conduct, consumer protection and responsible claims management.

Key TCF principles for claims handling

Outcome 3: Clear communication

FSPs must ensure policyholders fully understand their coverage, including exclusions and excesses, to prevent disputes during the claims process. Clients should receive step-by-step guidance on claim submissions, required documentation and expected timelines. Regular updates on claim progress and clear explanations for approvals or rejections are essential to maintaining trust. In cases of rejection, FSPs should educate clients on their rights, including escalation to the National Financial Ombud Scheme South Africa (NFO).

Outcome 4: Sound advice

All new advice should begin with a comprehensive risk assessment process. Affordability is an important consideration, but it should be addressed after the client has been advised on their overall insurance needs. Clients must understand their full risk exposure – and by focusing on needs-based advice first, FSPs help clients make informed decisions. 

Inherited policies should be treated as opportunities for fresh, client-centric advice. FSPs must conduct thorough risk assessments to ensure policies meet evolving client needs. If a policy is found to be lacking, this should be brought to the client’s attention.

Outcome 5: Product performance

FSPs must ensure products deliver as promised. High repudiation rates may indicate misaligned advice or vague product terms. Analysing claims data helps identify gaps in communication or advice.

Outcome 6: Access to benefits

Claims should be seamless, with minimal admin hurdles. FSPs must help clients understand requirements and provide ongoing support. Tracking claims data enables service improvements and highlights potential bottlenecks.

Common challenges 

Late claim registration: Delays in reporting claims often lead to rejections. FSPs must track loss dates and remind clients to submit claims within the required time frame.

Incomplete documentation: Missing paperwork prolongs claim processing. FSPs should proactively collect necessary documents at policy inception.

Claim repudiations: When insurers reject claims due to exclusions or policy misunderstandings, clients become frustrated. Clear policy explanations upfront can manage expectations.

Uninsured item claims: Clients sometimes attempt to claim for non-covered items, leading to disputes. Transparency about coverage limits is crucial.

Frequent claims: Excessive claims can make a client uninsurable. Educating clients on the purpose of insurance helps manage expectations.

Communication gaps: Poor communication causes uncertainty. Regular claim status updates improve trust and reduce client anxiety.

Dispute resolution issues: Handling rejected claims with transparency and assisting clients with formal complaints can strengthen client relationships.

Staff inefficiencies: Late submissions and lack of claim tracking by staff can cause unnecessary delays. Regular training and standardised processes are essential.

Overcoming these challenges

1. Proactive documentation collection 

FSPs should collect essential documents at policy inception. 

2. Regular claims monitoring 

A structured claims diary system helps track outstanding requirements and prevents delays. A well-maintained record serves as an audit trail and regulatory compliance safeguard.

3. Clear and regular communication 

Using platforms like WhatsApp for document submissions and status updates enhances communication efficiency and reduces delays.

4. Leveraging technology for simplification 

Digital claim forms accessible via smartphones streamline submissions, reducing paperwork and administrative inefficiencies. Partnering with insurers to integrate online tools accelerates claims processing.

5. Continuous staff training 

Ongoing training ensures that staff members remain knowledgeable.

6. Standardised claims handling processes 

Developing a standardised claims management system ensures consistency and improves efficiency.

7. Managing client expectations 

Setting realistic expectations by under-promising and over-delivering helps maintain trust and minimises dissatisfaction when insurer decisions are unfavourable.

8. Partnering with reputable insurers 

FSPs should collaborate with well-established insurance providers known for fair and prompt claims handling to mitigate risks associated with poor service.

Better claims handling means better business

A seamless, efficient claims process benefits both clients and FSPs:

• Higher client retention
• Positive referrals
• Operational efficiency
• Stronger insurer relationships
• Enhanced reputation.

Creating a competitive advantage

Short-term claims handling represents a pivotal touchpoint in client relationships, where trust is reinforced or lost. By proactively addressing challenges, adhering to regulatory standards and leveraging technology, FSPs can turn claims handling into a competitive edge.