UK: Call Centre Outsourcing: FSA Reviews Telephone Sales In The Insurance Industry

Last Updated: 14 June 2007
Article by Yuban Moodley and Paul Edmondson

The FSA has recently carried out a thematic review into general insurance telephone sales practices within outsourced and captive call centre operations. The thematic review provides examples of good and bad practice for both outbound and inbound sales calls, covering areas such as call quality, systems and controls, training and competence regimes, outsourcing, and sales staff remuneration. Whilst sales of payment protection insurance were not specifically included within the scope of this review (because FSA thematic work has already taken place in this area), the majority of FSA’s findings are also relevant to the payment protection industry.

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The FSA has recently carried out a thematic review into general insurance telephone sales practices within outsourced and captive call centre operations. The thematic review provides examples of good and bad practice for both outbound and inbound sales calls, covering areas such as call quality, systems and controls, training and competence regimes, outsourcing, and sales staff remuneration. Whilst sales of payment protection insurance were not specifically included within the scope of this review (because FSA thematic work has already taken place in this area), the majority of FSA’s findings are also relevant to the payment protection industry.

FSA report

While FSA found that the overall quality of inbound sales for general insurance was ‘generally acceptable’, it found the quality of outbound sales to be ‘unacceptably low’. FSA criticises the lack of oversight of supervisors and team leaders, finding common systems and controls weaknesses in both inbound and outbound call centres.

FSA is particularly concerned that call centres do not have appropriate procedures in place to ensure that all customers are treated fairly. It found that firms of all sizes were confusing the concepts of customer satisfaction with treating customers fairly and that some senior management in call centres paid no attention to the latter.

In FSA’s sample there was little or no disclosure of significant exclusions and unusual limitations in 36% of all inbound and outbound calls. This was similar across different firms (large and small, brokers and insurers) and affected all types of insurance considered by FSA.

Wider issues

FSA is currently moving towards principles based regulation and away from a more detailed and prescriptive rulebook. A cornerstone of FSA’s principles based approach is the requirement for firms to pay due regard to the interests of their customers and treat them fairly (known as ‘TCF’). This report, on telephone sales, highlights FSA’s particular concerns regarding the ability of firms to deliver what it requires on TCF compliance.

Outsourcing to call centres

Firms that outsource their sales functions are fully responsible to FSA for poor practice in third party call centres. FSA states that it is essential that customers are treated fairly regardless of whether the firm uses in-house or outsourced call centres. Firms are expected to keep in very close contact with their third-party call centre operators and ensure that they have a thorough understanding of their obligations under the FSA regime.

FSA found that there was generally a lack of clarity about who was responsible for TCF when products were being sold through third-party call centres. If the third-party call centre and the firm whose products it is selling are both authorised by FSA, they are both responsible for ensuring that customers are treated fairly. The third-party call centre cannot simply rely on the firm whose products it is selling for scripts, sales process and systems and controls. When firms set up outsourced arrangements like these, the parties must be clear as to where responsibility lies.

Protecting your position

Firms will want to make sure that they are not exposed if their third-party call centre is found wanting by FSA. This can be achieved by appropriate due diligence and contractual protection.

Before selecting a call centre service provider, firms should satisfy themselves that both they and their proposed service provider have adequate systems and controls in place to meet their regulatory obligations. In particular, a firm should ensure that there will be an appropriate flow of management information from the service provider to the firm to enable the firm to identify any issues at the earliest possible stage.

Outsourcing agreements should also be drafted to limit a firm’s exposure from poor practice on the part of a third-party call centre. It is important that the parties’ respective responsibilities are clearly defined and that the procedures to be followed by the third-party call centre are clearly set out.

Key ways to ensure that the outsourced provider delivers on TCF are as follows:

  • Put sales procedures in place which will ensure that sales are conducted in a compliant manner. Particular areas of concern arising out of FSA’s thematic review are:
    • ensuring customers receive a clear description of what is being offered, including any significant exclusions and unusual limitations, before they commit to purchasing;
    • giving the customer opportunities to ask questions;
    • if relevant, comparing the different products that are available;
    • if appropriate, sending documentation to the customer in advance, and allowing them time to read it before asking them to sign up;
    • not placing over reliance on a free period to justify weaknesses in the sales process;
    • making it clear if certain elements of the cover are optional;
    • ensuring staff do not seek to mislead the customer nor pressurise customers into buying a product.
  • Ensure that staff are provided with appropriate training to ensure compliance;
  • Put in place appropriate compliance monitoring procedures which will ensure the appropriate flow of management information both within the service provider itself and between the firm and the service provider. Insist on regular compliance reports and make the service provider accountable for achieving compliance.
  • Ensure that payment models are structured so that:
    • the service provider is not paid solely on the basis of volume of sales;
    • key performance indicators (KPIs) used to assess the service do not concentrate too heavily on achieving sales;
    • sales staff are not incentivised in a way which could encourage them to pressurise customers to buy the product;
    • remuneration packages are linked to compliance and meeting high quality standards; and
    • where a range of products is offered, sales of one do not attract higher commission than others.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 14/06/2007.

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