Poor handling of endowment mis-selling complaints by financial services firms will increase the number of such cases passing through the Financial Ombudsman Service to around 70,000 cases a year until 2007, alleges the service.
Details of the FOS’ plan and budget 2005/06 goes so far as to suggest endowments will make up around 60% of all cases, 115,000, handled this year – particularly with the introduction of the FSA’s time-bar – and some providers are see it as preferable to pay the £360 complaints handling fee set by the FOS to handle any complaint as they unwilling or unable “to devote sufficient resources to complaints handling”.
“The regulator has recently emphasised the importance of fair complaints-handling by some firms. The apparent unwillingness or inability of some firms to devote sufficient resources to complaints-handling suggests that, rather than seeking to resolve matters themselves, they consider the £360 cost of referring a case to the ombudsman service to be a commercially attractive option,” says the FOS plan and budget.
According to the key facts statement of the FOS budget, a significant proportion of consumer complaints about endowment mis-selling are being rejected because the standardised process involves little attention to the actual detail of each case.
As a result, firms are alleged to be rejecting around 20% of complaints and the FOS is upholding around 45% of endowment mis-selling cases presented, whereas the number of complaints usually rejected by firms amounts to 3-5%.
Iain Glen, director of regulatory services at Norwich Union, feels claims of poor service handling are unfair as its own complaints division now has over 300 staff to process 2,000-2,5000 endowment cases a month, and the life office is winning in excess of 80% of cases then assessed by the FOS.
Similarly, however, the FOS points out the same number of cases are being upheld where documents are submitted on behalf on consumers by endowment complaints-handling firms, because “an increasing number of consumers are represented by claims management companies who operate a similar standardised approach in presenting the consumer’s complaint”.
Emma Parker, FOS spokeswoman, says using an endowment complaints handling firm “does not seem to affect the outcome of the cases” submitted on behalf of clients, so the fact the service does not uphold a greater number of cases suggest the findings or a review are consistent whether or not the client submits a complaint on their own or with support.
The FOS recognises it had underestimated the number of cases it will process by around 6%, but a reduction in complaints elsewhere should allow adjudicators to manage to workload.
Likewise, efficiencies generated across in the business means the cost of completing a case has fallen from £750 to £475.
The FOS forecasts its budget for the coming fiscal year should stand at £51m, up from 44.5m in the current year. Case fees will account for £40m of the coming year's budget.
Whereas as in the past the majority of policyholders chose to have compensation paid direct to mortgage firms to contribute to their current mortgage package, at least 70% of compensation is now paid direct in the form of a cheque to the client, say officials, suggesting compensation payouts may not being used to reduce the shortfall on continuing endowment policies or to reduce mortgage payments.
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