global insurance management

Complaint Handling and the FOS

Nov 14 2011

Complaint Handling and the FOS

Relevance:             All firms

Action required:     Probably none, but issued as a reminder and for awareness purposes.

We reminded firms recently of changes to complaint handling procedures from 01 September.  If not handled properly, complaints could find their way to the Financial Ombudsman Service (FOS).

FOS was set up to settle individual disputes between consumers and businesses providing financial services. It is independent and impartial so it will look carefully at both sides of the story and weigh up all the facts.  Its role is to settle disputes, without taking sides. The service to consumers is free and there is no charge for the first three cases from a firm FOS deals with each year.  All FSA-regulated firms pay an annual levy that goes towards FOS's costs.

There are some time limits for consumers making a complaint and generally, these are:

  • six months from the business sending the consumer a final response (which has to mention the six-month time limit); and
  • six years from the event the consumer is complaining about (or, if later, three years from when the consumer knew, or could reasonably have known, they had cause to complain).

If FOS decides a business has treated the consumer fairly, it will explain why. But if it decides the business has acted wrongly – and the consumer has lost out as a result – FOS can order it to put things right. 

With effect from 01 January 2012, the maximum award that FOS can make is rising to £150,000, because it wants to “make sure that levels of consumer protection are maintained in real terms.”  We have previously reminded firms to check that their PI insurance cover recognises this increase and full cover will be maintained from the New Year – we are doing so again.

FOS issues a regular newsletter covering their work, including case studies and sometimes there are some that we think might be relevant to client firms.  The latest issue of “ombudsman news” had cases relating to students and 2 items in particular caught our eye:

  • firstly, a student living in Halls of Residence for one year insured his contents and was surprised that cover had continued (and premiums deducted from his bank account) because of an automatic renewal clause. 

FOS felt the wording in the policy document was unclear and also took into account the relative naivety of the person buying the insurance. FOS upheld the complaint and ordered refund of premiums plus interest.

  • secondly, a lady reported that her son had had a minor accident at university (miles away from address) and the insurer “avoided” the policy as they believed she had been “fronting” the policy. 

The FOS investigation concluded that the lady had misrepresented the true situation when she took out the policy and so the insurer was therefore entitled to decline the claim and to avoid the policy.  FOS did not uphold the complaint.

So, the message is for you to make sure from the outset that the customer fully understands what cover they are buying and be prominent about any clauses such as automatic renewal and have appropriate records available to support your position.

Finally, it has recently been announced that FOS has now been included in the scope of the Freedom of Information Act, which will allow firms and individuals to test out the FOS claim that it is an “appropriately open and transparent organisation”.


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