Ahmednasir Abdullahi Advocates LLP



Treating consumers fairly lies at the heart of an institution’s reputation which is one of its most important assets. Institutions that adopt a customer-centric approach are more likely to be successful and less likely to fall foul of consumer protection laws.

Unlike in countries such as the UK and South Africa where there is a regulatory and compliance framework for Treating Consumers Fairly (“TCF”) that applies to all financial service providers (“FSPs”), in Kenya, the TCF framework has only been implemented by the Insurance Regulatory Authority (“IRA”) and the Retirement Benefits Authority (“RBA”).

Both the RBA and the IRA require companies that provide insurance and pension products to comply with TCF Guidelines – which came into effect on 1st January 2017 – throughout the products’ life cycles and both Regulators, require the companies to self-audit on TCF and submit audit reports annually in a prescribed format.

The TCF Guidelines focus on ensuring fairness, clarity, transparency, and due regard for consumers purchasing products/services in the insurance and pension markets. TCF embraces 6 desired outcomes to ensure that consumer interests are not only protected but respected and given due regard.

It is instructive to note that the TCF Guidelines are well embedded in law as they were issued pursuant to the powers conferred upon the IRA and RBA under the Insurance Act and the Retirement Benefits Act.

Additionally, TCF principles echo the consumer welfare provisions under consumer-based laws such as the Competition Act and the Consumer Protection Act. These laws are of major significance specifically because they mandate compliance, protection, and enhancement of consumer rights and provide sanctions for breaches.

The Consumer Protection Act seeks to protect consumers from unfair business practices which are categorized as being either false representation or unconscionable representation. Violation of consumer rights under this law attracts liability to damages in civil suits, criminal liability and penalties in the form of fines or imprisonment of management officials found culpable.

The Competition Act on the other hand gives wide reaching ambit to the Competition Authority to determine consumer rights violation complaints arising from false and misleading representations by insurers. The Competition Authority is empowered to determine such complaints and take action including restraining persons from engaging in prohibited conduct and imposing financial penalties. Like the Consumer Protection Act, the Competition Act offenses create both civil and criminal liability including imprisonment of culpable management officers. 

There are other laws that are supportive of the TCF guidelines and they include the Access to Information Act and the Data Protection Act. These laws are relevant in the context of consumer protection as they give effect to the right of a consumer to access information. Additionally, the Data Protection Act places restrictions on, amongst others, the commercial use of personal data.

In the circumstances, it is prudent for all financial service providers (“FSP”) – not just insurance and pension products providers – to embed TCF into the fabric of its governance processes, frameworks and to monitor their behavior against TCF principles so as to protect its customers, manage risks and avoid both criminal and civil sanctions under consumer protection laws.

The six TCF outcomes to be realized across and FSP’s business practices, governance frameworks, and day-to-day processes are broadly:

  • Policyholders / Customers are confident that they are being treated fairly.
  • Products are designed to meet the needs of the policyholders/customers.
  • Policyholders / Customers are constantly and consistently given clear information about products.
  • Where policyholders/customers receive advice, the advice is suitable and appropriate;
  • Policyholders / Customers are provided with products that perform as they have been led to expect.
  • Policyholders / Customers do not face unreasonable post-sale barriers to change/replace a product or submit a claim/complaint

To achieve the expectations espoused in TCF, FSPs should develop a TCF framework and build TCF into the following key organizational structures and processes:

Leadership: The Board, senior and middle management need to provide direction and monitor the delivery of TCF behaviors and outcomes.

Strategy: The TCF aims should be carried through to implementation as part of the FSP’s broader business strategy. The TCF approach should be built into any strategic and business plans and should form an essential component of any strategic planning processes.

Decision-making: Decision-making protocols should ensure that decisions are tested for customer impact.

Governance and controls: The governance structures and control mechanisms within firms will need to be designed around TCF. For example, governance processes around product approval, distribution models, service standard setting, claims reviews, and complaint escalations would all need to cater to TCF considerations.

Performance management: The recruitment of appropriate staff and representatives, trained to deliver appropriate TCF outcomes, is necessary.

Reward: Remuneration, incentive, and reward policies need to take cognizance of fair customer outcomes and entail consequences for TCF successes and failures. Incentivizing other essential business goals such as profit and sales volumes must be reasonably balanced against encouraging TCF.

For the implementation of TCF to be successful, FSPs should provide objective evidence that it is treating its customers fairly. This will require management information (“MI”) mechanisms designed to monitor and measure the firm’s performance in delivering the six fairness outcomes.

The responsibility in ensuring that the principles of TCF are practiced at all times, in any form of customer engagement vests with every officer, manager employee, and intermediary engaged by the FSP. That is not to say that there shouldn’t be a TCF oversight unit. Indeed, it is recommended that a TCF Officer be engaged for the sole purpose of ensuring not only the implementation of TCF but the continuous achievement of the TCF outcomes.

All in all, implementing TCF should not be regarded merely as a compliance implementation project: Implementing TCF should be an ongoing, evolving, and ultimately permanent feature of an FSP’s approach to its business.

This publication does not represent legal advice by its author.

For legal advice contact our partner: Samson Mac’Oduol at samson@ahmednasir.law