1 April 2011 to 31 March 2012
We continued to settle cases at record levels – resolving a total of 222,333 cases in the financial year 2011/2012. This is 35% higher than the 164,899 cases we resolved in the previous year – and the highest number in any year since the ombudsman service was set up in the year 2000.
The approach we take to resolving disputes is largely determined by the individual facts of each case – and by the level of formality required to settle matters appropriately.
Our preference is to resolve complaints informally – getting both sides to agree at an early stage to the views or informal settlements that our adjudicators may suggest.
But more complex or sensitive disputes may require detailed investigations and lengthy reviews, including an appeal to one of our panel of 110 ombudsmen for a final decision.
During the year, the number of cases requiring the direct involvement of an ombudsman – and a formal ombudsman decision – continued to rise.17,465 cases had a final decision by an ombudsman in the financial year 2010/2011 – rising 18% to 20,540 cases in 2011/2012.
9% of cases we settled during the year required an ombudsman to make a final decision – as the last stage of our process. The proportion of cases appealed to an ombudsman has been slowly rising over recent years – from 6% in 2006/2007 to the current figure of 9%. This reflects a trend we have commented on in previous years’ annual reviews. This is the shift towards more entrenched disputes – with businesses increasingly taking a harder-fought and legalistic approach, and consumers becoming more demanding and less willing to concede.
Of the final decisions made by ombudsmen during the year, 36% of requests were made by financial businesses and 64% by consumers (38% and 62% respectively in the previous year).
In 86% of final decisions, ombudsmen reached the same basic conclusions as the adjudicators who handled the cases in the earlier stages. Where they did not do so, there was usually a finely-balanced judgement call or, more often, new facts came to light only at that very late stage.
|which complaints were more likely to require an ombudsman decisions?||%|
|general insurance (excluding PPI)||21|
|payment protection insurance (PPI)||2|
Proportionately more cases were referred to an ombudsman for a final decision where the dispute related to pensions and investments – generally reflecting the complexity of these disputes, the larger amount of money often at stake, and the socio-demographic background of many of the consumers involved.
|ombudsman decisions – by product||%|
|general insurance (excluding PPI)||27|
|payment protection insurance (PPI)||12|
Younger people remain statistically less likely to request a formal ombudsman’s decision than consumers of other ages. In fact, the proportion of cases requiring an ombudsman’s final decision increases by age group. However, this largely reflects the types of financial products involved – with older people more likely to have more complex products such as pensions and investments.
“… men and women requested ombudsman decisions in broadly equal proportions”
However, the proportion of men and women who requested a final decision by an ombudsman remained broadly similar – as did the proportion of requests made by consumers from different faith and ethnic groups. There is more information about the diversity of our customers – and their experience of our service – in this annual review.
As part of our work resolving complaints, our rules allow us to hold hearings – face-to-face meetings – held either in public or private. We can also hold hearings over the phone, where this is more convenient for everyone involved. Hearings are generally as informal as possible.
During the year we again held fewer than 20 hearings in cases where the ombudsman considered that it would help them get to the bottom of a case. We hold hearings only where the ombudsman believes a case cannot be fairly decided on the basis of the documentary evidence and the material that the two sides have already provided.
If we are asked for a hearing by either a consumer or a business, we consider carefully what value it will add. We do not believe that hearings should be held just to allow either side to confront the other in person – and neither side is given a private meeting with the ombudsman deciding the case.
We record the outcome of a consumer’s complaint as “changed” – meaning we upheld the complaint – in cases where:
The financial business told the consumer in its final response that it had done nothing wrong – but after the complaint was referred to us, we decided (or the business belatedly accepted) that it had done something wrong after all.
We record the outcome of a complaint as “not changed” – meaning we did not uphold the consumer’s complaint – in cases where:
|payment protection insurance (PPI)||89%||66%||82%|
|banking and credit complaints||2010||2011||2012|
|other banking services||46%||43%||41%|
|whole-of-life policies and savings endowments||26%||32%||30%|
|stockbroking and portfolio management||49%||66%||57%|
year ended 31 March
In total we upheld 64% of the complaints we settled in the financial year 2011/2012 – compared with 51% of cases in the previous year.
This figure varied across complaints involving different financial products. For example, during the year we upheld in favour of the consumer:
Since September 2009 we have been publishing complaints data on our website every six months about named individual businesses. The data shows the number of new complaints – and the proportion of complaints we upheld in favour of consumers – for businesses that have 30 or more new cases (and 30 or more resolved cases) in each six-month period. The complaints data shows that:
Where we uphold a complaint in favour of a consumer, there are a number of ways in which we can put matters right – depending on the individual circumstances of the case. These include:
Where we do not uphold a complaint in favour of a consumer, our aim is to give a clear explanation – from an entirely impartial standpoint – as to why we believe the financial business has done nothing wrong (or has already offered appropriate redress).
|year ended 31 March||%|
|telling the business to take actions to put things right that don’t have a direct cash value (for example, correcting a credit reference)||23|
|redress up to £1,000||23|
|£1,001 to £25,000||30|
|£25,001 to £100,000||5|
|more than £100,000 *||1|
|telling the business the basis or formula on which they must pay compensation (for example, where specialist calculations need to be carried out by an actuary)||18|
*The ombudsman can tell a business to pay compensation of up to £100,000 (£150,000 for complaints we received from 1 January 2012) – and can recommend that the business pay compensation in excess of this amount.
The figures in this table do not include any additional amounts that we might tell a business to pay, to compensate a consumer for distress and inconvenience.
We continue to see many entrenched disputes that could have been avoided – if there had been better communication between the financial business and the customer. Too many problems stem from simple misunderstandings that should have been cleared up at the outset.
our aim is to give a clear explanation – from an entirely impartial standpoint
We know that some consumers express their problems in an unfocused way that may make them seem unreasonable to the business they complain to. But we also see some businesses responding to customer concerns unhelpfully and defensively – aggravating problems that a clear, helpful and sympathetic explanation might have resolved.
Just because we might not uphold a complaint on its merits does not mean that the consumer may not genuinely feel upset and let down by the way the business treated them. Similarly, a consumer’s failure to present a reasoned argument does not automatically mean that a case has no merit – or that the complaint should be categorised as “frivolous and vexatious”.
Of the 222,333 complaints we settled during the financial year 2011/2012, we concluded that 5,667 cases (2.5% of the total) could be categorised as “frivolous and vexatious” (0.9% in the previous year).
99% of these cases involved complaints about mis-sold payment protection insurance (PPI) where it emerged that no policy had ever actually been sold. We published information on our website during the year about our approach in these cases.
We do not charge a case fee to the business complained about where we decide that a complaint is "frivolous and vexatious".
|year ended 31 March||resolved within 3 months||resolved within 6 months||resolved within 9 months||resolved within 12 months|
excluding PPI complaints
The table above shows the time it takes to settle complaints that are referred to the ombudsman service.
The proportion of cases we settled within nine months and within 12 months remained at similar levels to previous years. However, we were unable to settle as many cases as we wanted within our three-months and six-months targets, largely because of the impact of the legal challenge brought by the banks in relation to our approach to payment protection insurance (PPI) complaints.
This legal challenge gave rise to a number of issues that significantly affected our ability to deal with cases as promptly as we would have liked:
|PPI cases awaiting resolution at 31 March 2012||%|
|waiting for less than 6 months||64|
|waiting between 6 months a year||23|
|waiting between a year and two years||11|
|waiting over two years||2|
we are seeing businesses become less willing to concede and consumers become more demanding
We have continued to see businesses taking a more challenging – and in some areas, more legalistic – approach, not only in relation to PPI complaints but also to casework more generally.
For example, during the year an insurance company, Europ Assistance, launched a legal challenge (by way of a judicial review) against an ombudsman’s decision on a travel-insurance complaint involving volcanic ash – following delays and disruption to travel caused by a volcanic eruption in Iceland in 2010.
This legal challenge meant that over 300 consumers’ cases were held up for six months – until the High Court rejected the challenge in January 2012 and Europ Assistance said they would handle the cases in line with our approach.
In most areas of our work, we are seeing disputes involving hard-fought arguments and entrenched attitudes – on both sides – as businesses become less willing to concede and consumers become more demanding.
This resulted in an 18% increase during the year in the number of cases where an ombudsman issued a final decision as the last stage of our process.
We continue to prioritise cases where consumers might be disadvantaged by having to wait longer – for example, through financial hardship or for medical reasons. During the year we identified and prioritised over 10,000 cases where financial hardship was a significant issue. Around 4,000 of these cases related to overdrafts and loans – and more than 3,000 involved mortgages.
Of course, prioritising cases like these inevitably means that other complaints cannot be progressed as quickly as we would otherwise like.
We believe that professionalism should be central to our approach – and that this professionalism depends on our adjudicators and ombudsmen having the right knowledge and expertise to do their work to the highest standards.
… knowledge and expertise are at the heart of everything we do
As part of our commitment to putting professionalism and quality at the heart of everything we do, we have:
Quality is what matters most to our customers and stakeholders – and delivering a high-quality service is of fundamental importance to us. “Quality” means that in every case we should be able to show that we have:
… quality means getting the basics right, treating customers well, and making decisions in the right way
During the year we reviewed the framework we have in place for measuring and reporting on quality and consistency issues. This included:
We carry out a programme of stakeholder and customer research – to help give us a closer understanding of what our customers think and feel, how they rate the service we provide, and where we could do things better. During the year this programme included:
…we want a closer understanding of what our customers think and feel
Results and feedback from these stakeholder-research activities are shown in more detail in the chapters who complained to us and who the complaints were about.
Recognising where we have made mistakes – and learning from any shortcomings – is a vital part of our commitment to providing a first-rate customer service. This is why – just like the businesses whose complaints we handle – we have our own formal complaints procedure for people who are unhappy with the level of service we have provided.
We can usually sort out problems straightaway – as soon as someone tells us that they are unhappy with the standard of service they have received. The prompt involvement of the relevant manager – with an immediate phone call to apologise or explain – means we can resolve many issues without the problem escalating into a formal complaint.
But if we are not able to sort out matters at this stage to the satisfaction of the customer, one of our senior managers will look into the problem. This applies to complaints both from consumers and businesses. The process is entirely separate from the usual process that applies if a consumer or business disagrees with our views on the merits of their case – and wants us to re-consider facts and arguments.
In the financial year 2011/2012, we handled 2,382 complaints about our service. This was a 4% decrease compared with the 2,489 complaints we received in the previous year. We were able to resolve two thirds of these complaints directly within the teams where the problem arose – and a third of the complaints (805 of them) were settled with the involvement of a more senior manager.
Complaints about our service related to 0.9% of our total caseload (1.2% in the previous year). 5% of the complaints were made by businesses and the others were all from consumers or their representatives.
We upheld 37% of these complaints (33% in the previous year). Where this involved paying compensation – in recognition of the inconvenience caused by delays or administrative errors on our part – most payments were around £250.
Where we are unable to resolve a complaint about our service, it can be referred to the independent assessor – for a formal independent review of the level of service we have provided. Each year the independent assessor produces an annual report for our board, setting out findings and recommendations made over the year. We publish the independent assessor’s report in full on our website.
We are committed to identifying and implementing changes to our processes that help improve the quality, consistency and efficiency of our work.
Many of the projects and initiatives aimed at delivering improvements for our customers are co-ordinated as part of our “continuous improvement” framework. Others are part of our major “change programme” which we launched in 2010 to transform and modernise all aspects of our operations, in the light of the rapid and unpredictable growth in demand for our services.
During the year, our progress on delivering this programme has included:
… we need to adapt our processes to reflect both business and consumer needs
During the year we also launched an experimental casework project, testing out different ways of handling complaints involving e-money and payment transfers. New payment systems mean that consumers are interacting with financial services in very different ways – and are increasingly expecting to complain differently too, if something happens that they are not happy with.
This highlights the speed with which society, business and technology are evolving and transforming. We need to scrutinise our processes on an ongoing basis, to see how they might be adapted and updated to reflect both business and consumer needs.
As part of our programme of three-yearly external reviews, our board invited the National Audit Office (NAO) to carry out an independent review of our efficiency. We published the review in full in January 2012.
The NAO concluded that the key efficiency challenges facing us included our having to cope with volatile demand – such as the large surges of so-called “mass claims” like bank charges and PPI – and the way in which financial businesses themselves deal with customer complaints.
The NAO also noted that the programme of changes introduced in 2010 to modernise our operational processes and IT (including our “e-enablement” project) had already begun to realise benefits – and while some aspects of project management should be strengthened, the programme was being managed well with good progress made to date.
We are funded by an annual levy paid by the businesses we cover – and by case fees that we charge businesses for settling disputes referred to us about them.
In the financial year 2011/2012 we did not charge businesses case fees for the first three disputes involving them. Businesses were charged case fees only for the fourth (and any subsequent) dispute during the year.
Our budget is calculated on the basis of workload forecasts that we consult on publicly each year through January and February – before the start of the new financial year.
Following public consultation in January and February 2011, the boards of the FSA and the Financial Ombudsman Service approved a balanced budget for the ombudsman service – for the financial year 2011/2012 – that assumed both income and expenditure would be £102.9 million, with a unit cost of £571. Our unit cost is calculated by dividing our total costs (before financing charges and any bad debt charge) by the number of cases we complete.
|our unit cost (£)|
The actual final figures for the year showed total income of £125.5 million, expenditure of £107.5 million, and a unit cost of £484. These were significantly different from the figures that had been anticipated at the start of the year, reflecting the operational volatilities we experienced during the year.
For example, we had expected to be able to complete and close between 60,000 and 84,000 payment protection insurance (PPI) cases during the year. But this number rose to 117,806, because in the second quarter of the year we were able to resolve a much larger number of PPI cases than expected – as businesses agreed to settle, without challenge, many complaints that had been held up by the judicial review.
However, we saw the costs of dealing with PPI cases rising steadily – as the high volumes of new complaints showed little sign of abating, and as businesses and claims-management companies became less willing to settle cases at an early informal stage. This meant we started to see increased numbers of entrenched disputes requiring detailed investigation and analysis.
This is a trend we expect to continue into the future – and we have proposed changes to our charging structure from 2012/2013, to reflect the rising costs of dealing with our increasingly complex and challenging PPI caseload.
… we reduced our underlying cost base by 10%
In spite of these volatilities, we were still able to deliver the cost-cutting programme to which we had committed during the year. This involved reducing our underlying cost base by 10% through a range of measures, including re-negotiating contracts, strengthening our procurement capability, internal restructuring, and introducing a new framework for managing our contractors.
As part of the NAO’s review of our efficiency this year, it identified that while the total costs of settling disputes at the ombudsman service had risen by 214% in real terms since 2001, the complaints workload we have handled over this period had increased by 376%.
|our income and expenditure (summary)||actual
These figures are drawn from our unaudited management accounts. The directors’ reports and audited financial statements are available separately on our website and as hard-copy from July 2012.