Complaints Seminar South West Region
Our thanks go to Bristol & West for accommodating such a large crowd of around 90 people to the South West Region’s seminar on complaints handling with David Millington, Ombudsman Financial Ombudsman Service and Mark Smith of Zurich Financial Services. Another combined event with the Insurance Institute of Bristol organised by Paul Timmins. Paul’s profile and photo can be found on the South West regional pages of the member website as can the slides for this event under ‘Seminars’ by kind agreement of the speakers.
David Millington outlined the structure of FOS especially for the newly regulated mortgage brokers and soon to be regulated insurance brokers. It is now a huge organisation about to reach almost 1000 staff and to be refocused to external business streams with five lead ombudsmen. Cover is widening with M Day and I Day plus in 2006 Consumer Credit will be covered with around 100,000 firms. There will be smaller organisations and FOS will need to adjust to its new constituency.
FOS tries to resolve complaints by mediation and gather information to issue an initial view. If the customer accepts then both the customer and firm are bound by the decision. It is possible to go to judicial review if the firm believes FOS has bee irrational or unfair. Most complaints are resolved informally with 72% rejected. There are no backlogs but around 21,000 cases work in progress. 65% of 108,000 are endowment mortgage related and there is a concern that FOS is becoming a free outsourcer for some firms.
With endowments there are questions around oral advice as it is difficult to prove what was said. Does the customer see a salesman or an adviser? The key for firms is not to assume as one bank suggested that because it had a procedure in place this must have been followed. An example was also given of a misleading advertisement where the good news was 120 times bigger than the bad. It really happened and duped a lot of people. Record keeping may be a problem and Halifax for example does not keep copies of mortgage offers thus making cases difficult to defend.
David was asked a question about the enforcement of decisions. Unfortunately FOS cannot enforce a decision on firms only FSA has enforcement powers. The customer may have to resort to the courts to get a decision by FOS enforced.
The use of regional offices was also raised and whilst this has been considered there are considerable problems around consistency of decision making and working in the same building can assist with that process. Again someone asked if consumers should be charged but there is no appetite for this in Government and it is a non-starter. What about non- compensation awards? They did ask for a letter of apology to be delivered to the complainant by a senior person in the firm but generally most remedies are financial.
Mark Smith took us through some thorny issues around time barring. There is a strong legal view in favour of time bars although John McFall of the TSC is quoted as assaying ‘This situation, arising from a deadline people did not know existed, is inexcusable.’
There has been a 20% increase in third part or ‘ambulance chaser’ complaints over the last nine months not just on endowments. There is a huge range in their quality from the professional to those who charge exorbitant fees ranging from 10% - 40%+ of the surrender value and compensation. Zurich tries never to pay ‘ambulance chasers’ directly.
Zurich is not relaxing the time bar to be fair to existing customers and those already excluded. They are due around five hundred cases back from FOS due to time-barring issues.
There are still complaints other than endowments to resolve. Pensions, MIP and whole of life are big areas for Zurich. Which have been championing contracting out of SERPs and this is one to look out for. Summer has remained high in terms of complaint numbers against the normal trend and they have had a 30% increase in complaints staff.
With the endowment mailing Zurich have switched to using red ink. Changing the typeface itself has been a huge cost at around £500,000 although it is too early to judge the impact on responses. There has been a spiralling of salaries for complaints staff and Zurich have been conducting some benchmarking to ensure stability. There is still a significant risk of a full-scale endowment review.
In terms of follow action on trends this may be prompted by one serious complaint or banned sale, three justified complaints of a similar nature or five of any sort justified or seven complaints justified or not. Another prompt may be if a small number of significant complaints arise from the same branch leading to a review of that branch. This may indicate a sales manager was telling advisers to do the same thing.
Outsourcing plays a significant role in managing endowment complaints. If it is done correctly and delivered on time it can be very effective use of resources. There is great difficulty in finding review staff from within the organisation. An outsourcer must have demonstrably ability to scale up, deal with complaints on time and provide confidence in the management structure of the firm.
Questions followed including the quality of FOS decisions. David confirmed each case was checked by a line manager and there is also quality assurance which can overturn adjudications. A quality director, will co-ordinate initiatives to deal with any issues that arise. Any serious concerns are looked at but very few cases need to be revisited. On the General Insurance side there has been an issue over keys in cars. Ombudsman news provides case studies for firms to look at. The case studies are sanitised to make the point. The FOS annual report is also recommended reading. The role of the FOS is to help create a level playing field between firms and customers.
On issues with wider implications a more formal and transparent basis is likely to immerge. There have been very few complaints from voluntary jurisdiction with mortgage firms. David expects complaints from brokers to rise and FOS needs to learn more about smaller firms.
The next seminar in the South West is planned for the first quarter of 2005 and is likely to be about depolarisation. We welcome your views on what you would like us to provide for you, which can be submitted via the regional pages of the member website.