An Evaluation of the Treating Customers Fairly (TCF) Concept and Its Influence on Consumers’ Purchase of Non-Life Insurance Products

Abstract

In recent years, the financial services sector, particularly insurance, has seen a rise in attention toward fairness and unfairness, driven by a focus on how policyholders view equitable treatment from insurers. This study focuses on assessing the concept of treating customers fairly (TCF) and its influence on consumer perceptions of fairness in South Africa's non-life insurance industry. The study employed an experimental methodology incorporating survey data collection in which a sample of 241 respondents completed the questionnaire, which assessed how non-life insurance customers perceive fairness in the renewal of their policies, how TCF principles influence customers' purchase of non-life insurance products, and how TCF principles influence consumers' intentions to purchase additional non-life insurance products. Data obtained from the questionnaires underwent rigorous examination using three statistical approaches: confirmatory factor analysis (CFA) to verify the constructs, structural path modelling (SPM) to examine the pathways, and logistic regression to assess the predictive relationships. Survey responses indicate that most customers feel adequately served by their insurance companies. Factors such as transparency, product suitability, integrity, clear communication, and disclosure of information play a crucial role in customers' positive perception of fairness. However, concerns about unfair treatment exist in connection with the changeability of policies and post-sale barriers. The study identified five TCF principles that adversely influenced consumer choices regarding non-life insurance products. The only principle that positively and significantly impacted customers' purchase of additional non-life insurance products was TCF Principle 5, the Principle of Performance and Service Expectations. This means that customers are satisfied with the insurer if the insurer's products perform as the companies lead customers to believe and if the service provided is acceptable and meets expectations, leading them to buy additional non-life products. The study revealed contrasting effects of TCF standards on non-life insurance purchasing behaviour. Consumer willingness to acquire supplementary coverage increased in relation to three key principles: (1) organisational culture and governance structures, (2) appropriateness of product offerings, and (3) transparency in communications. Conversely, purchase intentions diminished when influenced by (4) advisory quality concerns, (5) service delivery expectations, and (6) post-purchase accessibility limitations. This indicates that implementing the first three Page 3 of 126 principles fosters an environment of customer satisfaction and trust, directly impacting customers' buying intention. The findings indicate that the correlation between the principles and customer purchase intentions is important for aligning business practices with customer- centric values to foster long-term relationships and success.