contents
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dealing with complaints at the initial stage
Our
customer contact division provides a ‘single point of entry’
for all consumer enquiries – by phone, letter and email. During
the year we handled 548,338 ‘front line’
enquiries – a 19% increase on the previous year (following
a similar 19% increase the year
before).
|
| front-line
enquiries from consumers |
year
ended
31 March
2004 |
year
ended
31 March
2003 |
year
ended
31 March
2002 |
| |
|
|
|
| phone
enquiries |
291,892 |
265,554 |
242,168 |
| written
enquiries |
256,446 |
196,786 |
146,071 |
| total
|
548,338 |
462,340 |
388,239 |
|
| complaints
referred on to our adjudicators |
97,901 |
62,170 |
43,330 |
|
| |
| Where
consumers contact us before raising their complaint directly
with the firm, our customer contact division forwards the complaint
to the firm and asks it to investigate the matter under its formal
complaints procedure. We remind consumers that they can ask us to
get involved directly if the firm has not been able to resolve their
complaint usually within eight weeks. Our
customer contact division also gives general advice and guidance
to consumers with enquiries. At this early stage, we try to nip
straightforward problems in the bud – before they become full-blown
disputes. For example, where a problem stems from a simple administrative
error or misunderstanding between the customer and the firm, it
might only take us a few phone calls to sort matters out.
An
increasing number of consumers are getting the information they
want directly from our website, rather than phoning or writing to
us. Around 75,000 people are now visiting our website each month
(a 25% annual increase) – and one in five people who log on
to our website download our complaint form. A third of people who
logged on to our website were first-time visitors.
Where
further work is needed to resolve complaints, our customer contact
division acts as the gateway to our specialist case-handling teams
of adjudicators.
complaints referred on to
our adjudicators
In the year ended 31 March 2004,
our customer contact division referred 97,901 new
cases to our adjudicators for more detailed dispute-resolution work
– a 57% increase on the
previous year.
|
new
cases
by type of complaint
|
year
ended
31 March
2004 |
year
ended
31 March
2003 |
| endowment
policies linked to mortgages |
51,917 |
13,570 |
|
|
|
other
'packaged' investment products
|
10,627 |
6,917 |
| including
complaints about |
|
|
| 
|
single-premium
investment bonds (including 'precipice' bonds) |
7,222 |
2,631 |
|
|
investment
ISAs |
1,537 |
1,581 |
|
|
PEPs |
693 |
855 |
|
|
unit
trusts |
306 |
585 |
|
|
|
| whole-of-life
policies and
non-mortgage-linked endowments |
5,442 |
5,009 |
|
|
|
| personal
pension plans |
5,303 |
7,233 |
| including
complaints about |
|
|
|
personal
pensions |
3,470 |
4,907 |
|
guaranteed
annuity contracts |
280 |
223 |
|
income
draw-down |
212 |
189 |
|
purchased
life annuities |
168 |
223 |
| |
small
self-administered schemes and executive pension plans |
144 |
162 |
|
stakeholder
pensions |
65 |
115 |
|
|
|
| mortgage
loans |
3,220 |
9,438 |
| including
complaints about |
|
|
|
dual
variable-rate mortgages |
146 |
6,535 |
|
|
|
| motor
insurance |
2,727 |
2,372 |
|
|
|
| current
accounts |
|
1,602 |
|
|
|
'splits'
and 'zeros'
(in relation to investment trusts)
|
1,673 |
2,233 |
|
|
|
| building
insurance |
1,549 |
1,285 |
|
|
|
| travel
insurance |
1,453 |
1,088 |
|
|
|
| credit
cards |
1,444 |
864 |
|
|
|
| contents
insurance |
1,154 |
1,009 |
|
|
|
| loans
other than mortgages |
1,116 |
933 |
| including
complaints about |
|
|
|
unsecured
loans |
770 |
695 |
|
second
charges |
229 |
174 |
|
home
income plans |
117 |
64 |
|
|
|
| other
banking services |
1,106 |
1,485 |
| including
complaints about |
|
|
|
cheque
clearance |
368 |
239 |
|
money
transfer |
223 |
111 |
|
cash
machines |
128 |
114 |
|
safe
custody |
43 |
20 |
|
|
|
| portfolio
and fund management |
921 |
1,044 |
|
|
|
| permanent
health insurance (PHI) |
872 |
792 |
|
|
|
| other
types of general insurance |
868 |
892 |
| including
complaints about |
|
|
|
commercial
policies |
242 |
298 |
|
pet
insurance |
134 |
72 |
|
caravan
insurance |
78 |
52 |
|
|
|
| savings
and deposit accounts |
806 |
748 |
| including
complaints about |
|
|
|
cash
ISAs |
117 |
102 |
|
TESSAs |
86 |
109 |
|
re-discovered
passbooks and dormant accounts |
61 |
76 |
|
|
|
| loan
protection insurance |
802 |
803 |
|
|
|
| free-standing
additional voluntary contribution (FSAVC) schemes |
704 |
887 |
|
|
|
| critical
illness insurance |
582 |
492 |
|
|
|
| stockbroking
|
432 |
503 |
|
|
|
| extended
warranty insurance |
328 |
254 |
|
|
|
| private
medical insurance |
294 |
302 |
|
|
|
| legal
expenses insurance |
271 |
239 |
|
|
|
| personal
accident insurance |
129 |
130 |
|
|
|
|
derivatives |
55 |
46 |
| including
complaints about |
|
|
| |
spread-betting |
37 |
35 |
|
options
|
14 |
10 |
|
|
|
| total
number of new cases |
97,901 |
62,170 |
The
chapter, overview of complaints trends, gives more details
and background information about the main types of new cases we
received during the year. |
|
resolved cases
During the year, we resolved 76,704
cases – a 36% increase on
the previous year. In dealing with each case, we use our extensive
knowledge and experience of dispute resolution to decide the approach
that we believe will be the most appropriate in the individual circumstances
– and the most likely to settle the complaint quickly and
fairly.
Generally, the approach we take will begin with
an assessment of each case, to see whether we can resolve the complaint
using ‘guided mediation’. Mediation is often quicker
and more efficient than a formal investigation, which can sometimes
be quite a drawn-out process. If we cannot resolve a complaint by
mediation, we may need to take a more formal approach. This could
mean issuing an adjudication – setting out our recommendations
about whether the complaint should be upheld. In most cases, both
sides accept these recommendations. But either side can ask instead
for a review and final decision by an ombudsman.
The following chart shows the number of complaints
we have resolved at the different stages of our complaints-handling
process.
outcome
of cases
resolved at the different stages of our dispute
resolution process
|
year
ended
31 March
2004
number
of cases |
year
ended
31 March
2003
number
of cases |
|
|
|
| resolved
at the assessment stage (generally involving mediation and conciliation) |
32,136
(43%) |
22,312
(40%) |
|
|
|
| resolved
after investigation by an adjudicator |
38,263
(50%) |
27,857
(49%) |
| |
In
3% of cases, the complaint was found to be outside our
jurisdiction. |
|
In
9% of cases, the customer withdrew their complaint. |
|
In
26% of cases, the adjudicator found that the firm had
not treated the customer's complaint fairly. |
|
in
54% of cases, the adjudicator found that the firm had
treated the customer's complaint fairly. |
|
In
3% of cases, the adjudicator found that the firm had
generally treated the customer's complaint fairly -
but the firm still agreed a goodwill payment. |
|
In
5% of cases, the adjudicator acknowledged that the firm
had made an offer to the customer, but negotiated an
improved settlement. |
|
|
|
|
|
| resolved
by the final decision of an ombudsman |
6,305
(8%) |
6,290
(11%) |
| |
In
6% of cases, the complaint was found to be outside our
jurisdiction. |
|
In
1% of cases, the customer withdrew their complaint. |
|
In
37% of cases, the ombudsman found that the firm had not
treated the customer's complaint fairly. |
|
in
47% of cases, the ombudsman found that the firm had treated
the customer's complaint fairly. |
|
In
2% of cases, the ombudsman found that the firm had generally
treated the customer's complaint fairly - but the firm
still agreed a goodwill payment. |
|
In
7% of cases, the ombudsman acknowledged that the firm
had made an offer to the customer, but negotiated an improved
settlement. |
|
|
|
|
|
| total
cases resolved |
76,704 |
56,459
(100%) |
|
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|
| our
budget and productivity
The
Financial Ombudsman Service is funded by an annual levy that
is paid by firms covered by the service – and by a case
fee that we charge firms for each individual complaint. Our
budget is calculated on the basis of workload forecasts, which
we consult on publicly in our plan & budget –
published each year in January before the start of the new
financial year.
In
January 2003, when we first consulted on our budget for the
financial year 2003/04, we estimated that the number of new
complaints we would receive during the year would be only
slightly higher than in the previous year. In fact, as explained
in the chief ombudsman’s report, the volume of new complaints
increased by 57% on the previous year – almost wholly
because of the surge in complaints about mortgage endowments.
To
keep up with the substantial increase in new complaints, we
needed to increase our complaints-handling capacity to ensure
we met our published timeliness targets and kept our work-in-progress
at acceptable levels. The additional case fees from the increased
number of cases we closed resulted in our income for 2003/04
rising to £41 million – £6.4 million more
than we had forecast in the budget. This means that 68% of
our funding during the year was raised through case fees and
32% through the levy – whereas our budget had assumed
that income from case fees would raise 65% of our total funding
and the levy, 35%.
Our
total expenditure for the year was £36.5 million –
£1.8 million more than our budget. This increase in
costs resulted almost wholly from our needing to recruit additional
staff during the year, to deal with the increased volume of
new complaints. At the end of the financial year (March 2004)
we had 725 employees, compared with the budget figure of 583.
Our
unit cost for the year – the average cost of handling
a complaint at the ombudsman service – was £473,
compared with the budget estimate of £541 and £518
in the financial year 2002/03. Our unit cost has fallen by
£257 since 1999/2000, when we brought the separate ombudsman
and complaints-handling schemes together under one roof. This
35% decrease in costs over the last four years has resulted
from improved efficiency in our case-handling procedures and
from economies of scale – spreading our fixed costs
over a greater number of cases. However, there will be fewer
opportunities to benefit from economies of scale when the
wave of mortgage endowment complaints eventually subsides
and our work returns to handling a more balanced range of
disputes. This means that our unit cost is likely to stabilise
rather than continue to reduce.
Our
rate of productivity (which we define as the average number
of cases resolved weekly by each adjudicator) was slightly
higher than the figure we had forecast in the budget. We had
assumed a small fall in productivity – compared with
the figure achieved in the financial year 2002/03. This was
because we had not expected to be able to sustain the exceptional
level of productivity which had resulted in the previous year
from economies of scale, case-handling improvements and staff
overtime.
|
|
number
of cases resolved
2000 = 22,100
2001 = 28,400
2002 = 39,194
2003 = 56,459
2004 = 76,704
year ended 31 March |
|
| |
|
| average
number of cases resolved weekly by each adjudicator
2000 = 3.1
2001 = 3.3
2002 = 3.75
2003 = 4.9
2004 = 4.9
year ended 31 March |
|
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|
| our
unit cost
–
is calculated by dividing our total costs (before financing
charges and any bad debt provision) by the number of cases
we complete.
2000 = £730
2001 = £753
2002 = £684
2003 = £518
2004 = £473
year ended 31 March |
|
However, because of the unexpectedly
large number of mortgage endowment complaints – which are
often less complex and quicker to resolve than certain other complaints
– and as a result of many additional hours of overtime (for
which our adjudicators are rewarded through our incentive scheme,
rather than through direct extra pay), we were able to maintain
the same rate of productivity as in the previous year.
Offering
staff an incentive scheme as part of our reward and remuneration
strategy – with performance awards where agreed targets are
exceeded – has helped us to meet service delivery targets
in the face of significant increases in workload. It has also helped
maintain a level of productivity which we suggested in last year’s
annual review might not be sustainable in the long term.
Our incentive scheme costs around 7% of our staff-related costs
– and provides a more targeted, measurable and cost-effective
reward system than paying overtime.
our
income and expenditure
(summary) |
actual
year ended
31 March 2004
£ million |
budget
year ended
31 March 2004
£ million |
actual
year ended
31 March 2003
£ million |
actual
year ended
31 March 2002
£ million |
| income |
|
|
|
|
| annual
levy |
13.1 |
11.9 |
14.7 |
0.0 |
| case
fees |
27,4 |
22.7 |
21.1 |
3.5 |
| former
schemes’ service charges |
0 |
0 |
0 |
23.8 |
| other
income |
0.5 |
0 |
0.4 |
0.2 |
| total
income |
41.0 |
34.6 |
36.2 |
27.5 |
|
| expenditure |
|
|
|
|
| staff-related
costs |
26.6 |
24.4 |
20.5 |
18.6 |
| other
costs |
6.8 |
6.5 |
6.6 |
6.1 |
| financing
charges |
0.2 |
0.6 |
0.4 |
0.7 |
| depreciation
|
2.9 |
3.2 |
2.5 |
1.8 |
| total
expenditure |
36.5 |
34.7 |
30.0 |
27.2 |
|
| exceptional
item - write-off of establishment costs |
0 |
0 |
2.9 |
0 |
| surplus/(deficit) |
4.5 |
(0.1) |
3.3 |
0.3 |
The
surplus for the year of £4.5 million has been added to our
reserves. Our policy on the amount of financial reserves we keep
– agreed after consultation with the financial services industry
– is not to exceed 5% of our expected annual expenditure.
We will return any amount over this to firms, by reducing the amount
of the annual levy in the following year. This means that in the
financial year 2005/06 we expect to reduce the annual levy by approximately
£4 million, after allowing for the planned deficit in the
year 2004/05.
[
detailed financial statements]
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