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annual review 2008/09

1 April 2008 to 31 March 2009

chairman's foreword

In my foreword to last year's annual review, I wrote about the way in which complaint numbers can change very quickly - with the previous downward trend in complaint numbers reversing sharply to produce a record number of new complaints by the end of the year.

This volatility is now becoming a regular feature. We started the 2008/09 financial year expecting - after consultation with the financial services sector - to receive 90,000 complaints over the next 12 months. We ended the year exceeding this number by some 40 per cent - receiving a record 127,471 new cases between April 2008 and March 2009.

The rise in workload was driven by significant surges in complaints resulting from single-issue consumer campaigns. In particular, we received over 30,000 new cases about payment-protection insurance (PPI) and 18,500 complaints about credit cards - these two issues together making up around 40 per cent of our total workload.

We had been expecting high levels of complaints in these areas. But the volumes still exceeded our forecasts - and the forecasts of those we had consulted. The high volume of complaints about payment-protection insurance was especially disappointing. We had hoped that action by the regulator might result in the collective resolution of large numbers of complaints without the continuing need for consumers to refer individual cases to us.

The financial world is a very different place now from a year ago. The recent financial turmoil has affected the demand-led ombudsman service like so many other organisations. On top of the influx of new complaints about payment-protection insurance and credit cards, we are experiencing a significant growth in the number of complaints arising from the effects of the worsening economic climate.

These complaints have included buildings and contents insurance disputes - up by 29 per cent and 23 per cent respectively in the past year, as policyholders put in more claims and insurers resist them more vigorously; investment disputes - up by 30 per cent, and triggered largely by the falls in the stock market; and disputes relating to mortgages and unsecured loans - up by 11 per cent and 44 per cent respectively, as the "credit crunch" leads to increasing financial difficulty for many consumers.

We said in our corporate plan and budget in January 2009 that we could expect to see further increases in this kind of demand for our service as the country goes through difficult financial times. The likelihood must be that both consumers and businesses will tighten their belts and question their finances as never before.

Our challenge in responding to the substantial increase in workload has been to adapt our strategic and operational plans accordingly. We have recruited 175 additional adjudicators on a permanent basis together with a number of teams of contract and outsourced staff, to provide the flexibility to cope with volatility in complaint volumes.

The importance of monitoring the quality and consistency of our work becomes even more important as our output rises.

A key measure of our performance is the timeliness of our complaints handling. Our customer research continues to tell us that consumers and businesses want their cases settled as quickly as possible - as far as that is compatible with reaching a fair resolution.

It is disappointing that the improvement in timeliness that we expected could not be achieved, because of the heavier-than-forecast volume of new complaints and the inevitable lead-in time involved in recruiting and training the new adjudicators needed. I apologise to those who have had to wait longer than I would have liked for complaints to be settled.

That said, it is all the more pleasing to be able to report a 20 per cent increase in our productivity levels, measured by the number of cases resolved each week by each of our adjudicators - a tribute to the hard work and determination of our staff. The productivity increase has meant that we were able to achieve a 6 per cent improvement on our unit-cost target for the year - and to resolve 14 per cent more cases than in the previous year. There are more details about our budget and productivity further on in this annual review.

Last year's annual review focused on the independent review that we asked Lord Hunt of Wirral to undertake, looking at the accessibility and openness of the ombudsman service. We described Lord Hunt's recommendations as a bold agenda for change, which would take time and resource to implement.

Given the pressing demands of the workload during the year, I am particularly pleased that we have also been able to prioritise progress on a wide range of accessibility and transparency initiatives. The work I carry out as chairman of the Committee on Standards in Public Life brings home to me even more clearly than before how important it is for people and organisations carrying out public duties to be open and transparent about what they do.

The ombudsman service published policy statements in July 2008 setting out our strategic aims in relation to accessibility and openness. We followed these up with a detailed work-plan, set out as part of our corporate plan and budget.

We continue to update our website with details of our projects in these areas. These initiatives include practical arrangements for improving access for our customers (for example, extended opening-hours for consumer enquiries); targeted outreach work to raise awareness of the ombudsman among "harder-to-reach" and more vulnerable consumers; and the availability of more information, both about our own approach and about complaints volumes and uphold rates relating to individual businesses.

This annual review includes, as usual, the report from the independent assessor, Michael Barnes. The independent assessor's role is to investigate complaints from businesses and consumers about the level of service provided by the Financial Ombudsman Service in cases which our in-house service-review team has itself been unable to resolve.

The independent assessor reports directly to me and my board colleagues. His annual report, published in full each year, gives an insight into how our actions and processes affect individual consumers and businesses. As in previous years, all the independent assessor's recommendations have been accepted both in relation to specific complaints and, more generally, in relation to the service we provide. I am grateful to Michael Barnes for his work. He provides a fair and impartial appeal for people unhappy with our service and at the same time gives us a valuable mechanism for feedback and scrutiny on our performance.

Sir Christopher Kelly KCB
May 2009