A huge increase in the number of complaints made to the Financial Ombudsman Service seems to reflect...
A huge increase in the number of complaints made to the Financial Ombudsman Service seems to reflect the consumer's increased knowledge of financial matters rather than an indication more mistakes are being made, says a spokesman for the FOS.
Following publication of the FOS annual report today, David Cresswell, head of communications at the FOS says full breakdown of complaints made reveal the FOS' workload has more than doubled over the three years it has been running as a single ombudsman service.
That said, the overall 44% increase of complaints to all areas this year - except in stockbroking and savings - suggests consumers are being empowered by the level of information they now receive about their financial status, rather than being more demanding.
Total number of new complaints presented to the FOS increased 44% from 43,330 by the end of March 2002 to 62,170 by the same period 2003, says the report.
However, economies of scale and a serious overhaul of FOS working practices towards electronic processing has cut the cost of per case processing from £730 to £518.
While figures appear to have increased, says Cresswell, in some cases it is the closure of official FSA reviews - such as the pensions review - as well as a greater placement of products with one provider which has increased FOS statistics rather than a clear increase in complaints being made.
"FSAVCs and personal pensions have officially increased, but they would previously have fallen under the FSA's pension review. When the pension review ended, there were some cases which were more complex and still had to be resolved," says Cresswell.
"More and more consumers are not thinking in terms of product selection but in terms of brand or provider selection. The provider tends to run more products and accounts for consumers. So where there is bad news in one area or product range, very often the knock-on effect is there could be other problems within the customer's other products," adds Cresswell.
Complaints relating to personal pensions increased from 5,881 in 2002 to 7,233 in 2003 while Free-Standing AVC complaints increased almost 300% from 198 to 887 because most cases were no longer listed as part of the official FSA pensions review, which ended in June 2002.
Similar moves could be said of endowment complaints which decreased from 14,595 to 13,570 because the time frame within which reprojection letters were sent out and complaints could be made changed and subsequently lessened the chance of complaints being filed.
Another factor which influences complaints is whether the product is life-based or general insurance, continues Cressswell, because it is only when a claim has to be made against the general insurer that consumers think there might be a problem with their policy.
In particular, the one sector of general insurance which possibly needs greatest attention but is now likely to be unregulated is travel insurance, as one in ten insurance complaints concern a claim against the insurer because the client was not aware of certain exclusions.
Even though a product might be sold through an adviser, it is with the insurer that the client has the complaint because they have failed to ensure they know what is not covered and why that might be.
This, unfortunately, runs counter to FSA plans to exclude travel insurance from the new GI regulations, so it is possible to argue travel insurance complaints will continue to increase.
"Travel insurance is among the most complicated products to buy, because it has to cover everything from delayed flights to mortality issues. From the insurers point of view, they may be talking about very specific risks but consumers may not even know about them before the sign up," says Cresswell.
"If someone is missold a product, we don't tend to know about in relation to travel insurance until a claim is made, so the complaints arise after a claim has been rejected, rather than when the product is sold."
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