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learning from complaints

speech by Natalie Ceeney, chief ombudsman, to the Insurance Institute of London

London, 21 October 2010

Thank you for inviting me to speak to the Insurance Institute today.

I became chief ombudsman and chief executive of the Financial Ombudsman Service at the end of March 2010 - so I'm now seven months into the job. This is long enough to get a feel for the organisation and the environment we operate in - but short enough to still have a fresh pair of eyes.

The main focus of my talk today is "learning from complaints" - both from the complaints you see and from our own findings in the cases we see.

But by way of background, I want to start by looking at the changing world in which we are operating - and the challenges we are facing.

Then I want to talk a little about your own organisation's mindset to complaints - what you see and what the complaints you receive can tell you.

Then I'd like to talk about what we are seeing at the ombudsman service.

And finally, I want to leave you with the thought that good outcomes are in your hands.

the changing world

The last decade has seen huge change - in the world of work, our society and how we go about our everyday lives.

Ten years, Google was just two years old. Some of us were still dismissing the internet as a passing fad. How things have changed!

The ombudsman world hasn't been immune to rapid change either. As many of you will know, we were set up ten years ago - an amalgamation of separate complaints-handling schemes.

The first of those schemes was the Insurance Ombudsman Bureau - set up by the insurance industry itself nearly 30 years ago. So you should certainly take the credit for being ahead of your time and leading the way in providing for alternative dispute resolution.

In 2001 the new Financial Ombudsman Service bought together 300 or so staff from the previous existing schemes under one roof for the first time. We now employ around 1,600 staff.

A significant feature of our work now are the so-called "mass claims". This started with mortgage endowments back in 2001. We've now handled around 300,000 mortgage endowment complaints - almost a third of our total workload over the last ten years.

Fast forward to 2010, and complaints about the sale of payment protection insurance (PPI) now make up about half of our work. We've dealt with over 120,000 PPI cases so far in the last few years - with a seismic shift from claims-related disputes to sales-related complaints.

Unsurprisingly, this environment of mass claims has seen the birth of claims-management companies and internet-mediated commentators. Currently 80% of all new PPI cases come via claims-management companies.

Going forward, we can only expect that the impact of the internet on people's lives will continue to grow rapidly. People experiencing "bad service" will increasingly go online to get a message "out there" to other consumers. This will go to the heart of reputation and brand.

Meanwhile, consumers - increasingly intolerant of bureaucracy - will continue to demand faster, more tailored services.

So using the past as a guide to the future, the world in ten years time will be a very different place from what we know today. It will be different in ways that we can't predict today. But it's pretty certain that the world will become more challenging - requiring new skills, new capabilities and different ways of working.

so what's happening to complaints?

At the ombudsman service we have been dealing with ever-increasing volumes of complaints over the last ten years. Last year alone, our overall volumes were up by nearly 50%. And overall complaint numbers are currently showing little signs of obvious decline.

Cases relating to banking, investment and some areas of insurance are appearing to level off - but we are receiving more cases than ever about PPI.

We are also seeing cases being harder fought through the process - with many consumers and businesses more reluctant to settle differences informally, and more likely to pursue disputes all the way through to the final stage of our "appeals" process - a final decision by an ombudsman.

When consumers come to the ombudsman service, we are already on the back foot. Most are unhappy and frustrated by the experiences they are complaining about. The challenge for us is significant - to provide a level of service that restores the consumer's confidence in financial services as a whole. This has to be good for everyone.

how do you think of complaints?

Dr Janelle Barlow of the University of California-Berkeley wrote:

Complaining customers give businesses a key opportunity to uncover problems. Resolving these problems can result in the conversion of these complaining customers into loyal ones who feel bonded to the company and will continue buying its products or services.

In other words, it is to the organisations' benefit to think of complaints as gifts ... The way a complaint is handled can mean the difference between creating an evangelist for the company or a lifetime enemy.

The research shows that effective and well-managed complaints-handling can pay dividends - not just for the customer, but also for you. If a complaint is handled well, the customer is more likely to remain loyal - and more loyal than those who don't have cause for complaint at all.

So we should be viewing complaints as a source of crucial management information about our customers.

According to the Technical Assistance Research Project (TARP) - who research customer service - customers who complain and are subsequently satisfied are 8% more loyal than if they had no problem at all.

Some sources suggest that, on average, a customer whose complaint has been handled well will recommend the business to five other people. But customers who are dissatisfied are likely to tell eight to ten people. And an average business may never even hear from over 90% of its unhappy customers. This is because instead of complaining to you, they tell their friends, family and colleagues.

So the way to generate positive "word of mouth" is to make it easy for customers to complain and to handle those complaints well. When you read complaints posted online, they almost always involve complaints that were handled poorly.

To bring this back to financial services specifically, as you know, the FSA is currently consulting on:

  • requiring firms to identify a senior individual responsible for complaints handling;
  • abolishing the "two stage" process - to shift the emphasis onto outcome not process;
  • requiring firms to identify and remedy any recurrent or systemic problems with complaints; and
  • taking account of ombudsman decisions and previous customer complaints and learning from the outcome.

So what all this tells us is that - although times are tough and the pressure is on to reduce costs - now is not the time to cut back on your complaints-handling functions.

what's your mindset when it comes to complaints?

Do you rely solely on the "letter of the law" and what the "rules" say - or do you try to see things from your customers' perspective?

Do you see complaints as insight - or compliance?

What is your process for enabling staff to learn from complaints?

How do you apply what you learn from your customers' complaints?

Do you measure the value of handling complaints well?

Do you understand the impact of complaints handling on customer retention and loyalty?

How can you use your approach to handling complaints in your marketing?

A recent Datamonitor survey of European retail banks revealed a direct relationship between:

  • the way management views customer complaints;
  • the way customers behave when making a complaint; and
  • ultimately how customers are treated.

An in-depth study of two Swedish banks also supported the idea that the attitude of branch managers to complaints directly affected how their front-line staff treated their customers. This Swedish research concluded that successful managers used complaints handling as their primary tool for creating long-term customer satisfaction with small-business customers.

Meanwhile, closer to home, a recent ABI Customer Impact survey had some disappointing findings. It noted that 58% of customers rated their insurer as "poor" complaint-handlers - a rating that has been declining over the last few years rather than improving.

the complaints we see

In the last full financial year (2009/2010), we received almost a million front-line enquiries and 163,000 new cases (up nearly 30% on the previous year).

In the current year, it looks like we will get closer to 180,000 new cases. But it's not just an increasingly volume of complaints we need to keep abreast of.

We need to keep up with the changing world and the changing needs of our customers - businesses and consumers alike.

We're doing a lot to take the service forward - with significant investment in staff and resources. We're reviewing our operating model and working to continue to reduce waiting times and improve service standards. This year, we aim to settle over half of all cases in three months and three quarters of cases within six months.

But we want to do more. And our plans are ambitious. I want us to reach a point where:

  • no one has to wait more than six months for a decision on their case;
  • everyone who needs to know about us does so; and
  • we are making the most effective use of technology.

Our "top five" areas of complaint in the last three months - payment protection insurance (PPI), current accounts, credit cards, mortgages and loans - are the same financial products most complained-about in the year before. So there is no change there.

However, these "top five" most complained-about financial products make up a larger proportion of our overall caseload now (nearly 75%) than in the previous year (when they made up 64% of the total).

This is mainly because of the increased numbers of PPI complaints. We've already had nearly three quarters of last year's total volume of PPI complaints in just the first six months of this year.

You will have noted that the only insurance product in the list of the most complained-about products is PPI. And as I mentioned earlier, the issues we are now mainly dealing with in relation to PPI relate to advice and sales - and not claims.

Meanwhile, investment and pension-related complaints together accounted for only 3.5% of the caseload in the first quarter of the current financial year.

As you will have seen from these figures, we are now publishing data about our complaint volumes on a quarterly basis. Previously, we published this information only once a year - after the financial year-end - in our annual review.

We noticed that this was one of the most-visited sections of the online version of our annual review - so we decided to start making the information available more often than just annually.

So each quarter we'll now be publishing snapshots of our workload in our newsletter, ombudsman news. I hope this makes it easier for you to see the numbers and trends as they emerge throughout the year - rather than only after the year has ended.

openness and engagement

Of course, this is not the only complaints data that we make publicly available. Last month we published, for the third time, our six-monthly complaints data relating to individual businesses.

Until a year ago, this information was confidential to us and the individual businesses concerned. We made it available publicly after extensive public consultation - and following the unanimous decision of our board.

The data shows the number and outcome of the cases we handle relating to the 150 or so named financial businesses that together account for around 90% of the ombudsman service's workload

Our strategic approach to transparency - and to sharing more information about our complaints workload - reflects our commitment to being more open about our work and what we see. Our aim in doing this is to help inform how businesses respond to complaints themselves.

The complaints data we make available identifies those businesses with low complaint volumes - but a significant market share and a high percentage of cases found in their favour.

The data also identifies those businesses that generate a significant number of complaints - with a high proportion found against them - whose complaints-handling standards and underlying commitment to treating customers well must be questionable.

As we had hoped when making the decision to publish this data, we are now seeing emerging evidence that the publication of these figures is encouraging some businesses to:

  • benchmark their standards of complaints-handling against others in their sector;
  • learn from businesses who are handling complaints better; and
  • have reduced numbers of unresolved complaints referred to us.

This gives us confidence that publishing data really can have an impact on the behaviour of businesses - and that it can improve overall practice, by helping businesses learn from experience.

But for the avoidance of doubt, there is a very clear line between sharing what we see to help raise standards, and using that information for "campaigning" purposes - and we are very clear that this is a line we can't and won't cross.

And of course, we share much more than complaints data alone. We recognise that we are uniquely placed to provide an independent and impartial view on the detail of what goes wrong - and how things can be best put right.

We want to be transparent about our approach - so that everyone can see the basis on which we arrive at our decisions. And we share what we see in a number of ways, including our regular newsletter, ombudsman news, and our online technical resource.

For example, the last two issues of ombudsman news have included topics of direct interest to this audience - our approach to complaints involving legal expenses insurance and disputes over the quality of repairs arranged as part of an insurance claim.

And two of our most recent online technical notes were on motor insurance and travel insurance.

Our work to engage with industry stakeholders isn't just about publishing information, though. It comprises a whole range of other activities too, including:

  • our regular events and roadshows around the country;
  • our relationship-management programme with the 30 financial services groups responsible for about 80% of the complaints we get; and
  • our technical advice desk - a dedicated service for people handling complaints in the financial services sector and the consumer-advice world - giving information and guidance on how we consider complaint issues.

And this is what we want to carry on doing - dedicating time and resource to continuing dialogue with you, the insurance industry, so that together we can:

  • resolve misunderstandings;
  • talk about underlying issues;
  • build a two-way with you - built on mutual understanding.

This doesn't mean, of course, that we always have to agree. We will make decisions you will not like - that's part and parcel of being an independent body that stands between two disputing parties. But disagreements shouldn't stop us from talking.

This is a journey together that has already started. In my first months in post, I have already met many chief executives of the major insurance companies. And I have more meetings scheduled in the coming weeks and months.

I am very impressed with the calibre of the new industry steering group - the high-level group that brings together chief executives of key financial services institutions, including from the insurance sector. This group provides a forum for discussing strategic issues such as major trends in complaints and the mechanisms for handling "mass claims" from consumers.

We have also established a wider industry panel - which covers issues such as complaints involving a particular product, sector or type of financial business - or particular complaints-handling process issues.

The wider industry panel keeps in touch with ombudsman-related issues through a fortnightly email newsletter and a series of events including meet the ombudsman Q&A sessions. It was one of these sessions that some of you who are here today also took part in last week at the ABI's offices.

And specifically for smaller businesses - or more accurately, for those businesses that tend to have fewer complaints referred to us - we host our smaller-business forum which includes representation from over 20 smaller-business trade associations.

But I'm not complacent about the importance of having all these channels of communication in place - and I know we still have some way to go. This is why I'm looking forward to working with you all over the coming months and years.

food for thought

In closing, I hope that I've been able to give you some food for thought today - and that I might have left you with a sense of complaints-handling at a more strategic level.

In essence, I believe that complaints are the opportunity for you to:

  • recognise an expectation that has not been met;
  • fix a problem (taking account of the ombudsman's position, where appropriate);
  • reconnect with - and gain more loyalty from - a customer that you might otherwise have lost;
  • generate positive word of mouth rather than negativity;
  • provide a better service and design - and sell better products in the light of what complaints tell you; and
  • put yourselves at a competitive advantage.

I believe that the process detail of your complaints-handling approach matters much less than your organisation's mindset. Your responsibilities to your customers don't end when you have done the deal or sold the product. You have ongoing responsibilities - including when you are responding to customer complaints. This is what providing really excellent customer service is all about.

Thank you for your time this afternoon.

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