skip tocontent

annual review 2000/2001

resolving insurance-related disputes

The insurance division of the Financial Ombudsman Service resolves disputes between consumers and insurance companies about general insurance (for example, motor and household insurance, travel insurance, loan protection and medical expenses policies). The Financial Ombudsman Service carries out this work on behalf of - and under the rules of - the Insurance Ombudsman Bureau (the IOB).

The disputes that the insurance division deals with are general insurance complaints which insurance companies have not been able to resolve themselves. By this stage, the complaints will have been "screened" by our customer contact division, to check that all opportunities to resolve them at an early stage have been pursued. Complaints involving life insurance and investments from insurance companies are dealt with by our investment division.

Membership of the IOB is voluntary. As at 31 March 2001 there were 231 members. A full list of members is available from our communications team (phone 020 7964 0370). In practical terms, almost all major UK general insurers are members of the scheme. When the Financial Services and Markets Act 2000 comes into force - expected by November 2001 - the Financial Ombudsman Service will be able to handle insurance-related complaints about all authorised insurance companies in the UK.

The insurance division has 56 staff - including a principal ombudsman (Tony Boorman, who is also the Insurance Ombudsman under the rules of the Insurance Ombudsman Bureau) and three other ombudsmen (Reidy Flynn, Stephen Lilley and Michael Lovegrove).

general insurance regulation

The conduct of general insurance business is regulated by a new organisation, the General Insurance Standards Council (GISC). We have worked closely with GISC during the year to help it develop its rules and, in particular, its new Code for Private Customers. This code will in due course replace the Association of British Insurers' (ABI) Code as a statement of the obligations of the industry when selling general insurance products. As the membership of GISC grows, the new code will play an important part in our consideration of many disputes.

We also commented on the new ABI Claims Code. This provides for standards to be maintained by firms when handling claims. Particularly welcome was the inclusion of obligations towards third party claimants. In due course it would seem sensible for the Claims Code to come under the scope of GISC.

FROM
the Chairman
....................
Council of the
Insurance Ombudsman Bureau
Maurice Healy OBE

June 2001

We have always been anxious to hand over our work to the Financial Ombudsman Service in an orderly way, so that our service to our member insurers and to policyholders who have a dispute with them can continue with as little disruption as possible.

So far as day-to-day practicalities are concerned, this has now been effectively achieved. For more than a year, the staff have been employed by the Financial Ombudsman Service, where they are working alongside their colleagues from the other financial sector complaints-handling schemes. The Financial Ombudsman Service has contracted with us to provide our services to levels of quality that we have mutually agreed. The Council's remaining task is to monitor the Financial Ombudsman Service's performance against those standards. I am glad to be able to report that the quality of decision-making under Tony Boorman's leadership remains high and that the investigation of cases continues to be carried out to high standards of productivity and timeliness. The Council was delighted to be able to appoint Michael Lovegrove, Stephen Lilley and Reidy Flynn as Insurance Ombudsmen.

The Council has been particularly glad to see the development of improved and effective systems for dealing with enquiries from policyholders wishing to use the ombudsman service. We are glad too, that the Financial Ombudsman Service has taken up and developed the initiatives we pioneered in providing information and guidance to insurers and consumer advisers.

I should like to pay a tribute to all those involved in what has been a highly complex administrative change. In particular, I should like to record the Council's gratitude to the staff for the positive way they have approached the uncertainty and disruption of moving and changing their conditions of employment. We have lost some valued colleagues and, of course, the change caused some problems. But the staff have made their farewells to the South Bank and re-established in Docklands in good heart.

It now seems certain that IOB will cease to function and the Council will disappear in the autumn. But the work the IOB started as the first of private sector ombudsman schemes in 1981 will go on. Our history is being recorded in the research project being carried out by Peter Tyldesley at the Guildhall University. The German insurance industry has decided to establish a scheme based on our experience after coming to see us last year. Most important is of course, the work of the Financial Ombudsman Service itself. We wish it well.

Maurice Healy
Chairman
Council of the Insurance Ombudsman Bureau

new cases

In the year ended 31 March 2001, the insurance division received 6,559 new insurance-related cases, a 7% decrease on the 7,061 new cases received in the year ended 31 December 1999*.

new cases about general insurancence by subject matter year ended
31 March 2001
year ended
31 December 1999*
percentage
change
motor 1,989 2,317 -14%
buildings 927 1,029 -10%
contents 868 983 -12%
loan protection 711 792 -10%
travel 778 756 +3%
warranty 366 255 +44%
personal accident 197 193 +2%
legal expenses 152 161 -6%
medical expenses 194 152 +28%
other 377 423 -11%
total 6,559 7,061 -7%
* The IOB has traditionally used a December year-end, and its last published annual report covered the year from 1 January to 31 December 1999. This consolidated annual report published by the Financial Ombudsman Service covers the period from 1 April 2000 to 31 March 2001 - the formal reporting period for most of the Financial Ombudsman Service's constituent schemes - so it does not include complaints figures for the IOB relating to the first quarter of 2000. For the sake of statistical completeness, 1,842 new cases were received by the IOB during the three month period, 1 January to 31 March 2000.

There was a particularly welcome decrease in the number of cases received involving motor policies. This reflected in part the greater emphasis on the resolution of straightforward matters at the initial enquiry stage by staff in our customer contact division.

Less positive was the significant increase in disputes about warranty insurance. These products, usually covering the cost of repairs to certain household products such as televisions and furniture, appear to represent an increasing cause of problems for many customers. In over a half of the cases we investigate involving warranty policies, we conclude that the complaint should be upheld in full or in part - compared to less than 40 per cent on average for all policy types.

The increase in cases about medical expenses policies (private medical insurance) partly reflects the expansion of the IOB membership to cover all major medical expenses insurers. In addition, it is clear that issues such as the distinction between chronic and acute conditions - which we discussed in the January 2001 edition of ombudsman news - are of concern to many customers.

The 7% fall in the overall number of complaints received in the year ended 31 March 2001, compared with the year ended 31 December 1999, is the result of the record level of new general insurance cases reported by the IOB in 1999. This followed a change in the IOB's procedures, to make access more straightforward for customers.

resolved cases

We settled more general insurance cases than we received - closing 7,128 cases between 1 April 2000 and 31 March 2001 (and 2,004 cases in the period from 1 January to 31 March 2000 - see the footnote ). Of these cases, the majority required detailed investigation by our adjudicators and 13% needed to be resolved by the formal exercise of the ombudsman's powers.

The figures for 1999 were collected by the IOB on a different basis from that now used by the Financial Ombudsman Service, so a direct comparison between the two years should be treated carefully. However, there has been an increase both in the number of cases being investigated and in the proportion of cases where we uphold the complaint in whole or in part.

For the year ended 31 March 2001, 62% of cases were closed within six months; 32% took between six and twelve months; and 6% took over twelve months.

outcome of cases about general insurance* year ended 31 March 2001 year ended 31 December 1999**
resolved by conciliation or mediation (agreed voluntarily by both sides) 25% 26%
resolved after investigation by an adjudicator 62% 59%
in favour (in whole or part) of the customer 23% 18%
in favour of the insurance company 39% 41%
resolved by the final decision of an ombudsman 13% 15%
in favour (in whole or part) of the customer 7% 7%
in favour of the insurance company 6% 8%
100% 100%
   
* In order to present statistics as consistently as possible, in a format which allows comparison with similar figures from the other complaints-handling schemes, some information which was included in past annual reports of the Insurance Ombudsman Bureau is not covered in this consolidated report. However, this data can be made available on request for research purposes.

** The IOB has traditionally used a December year-end, and its last published annual report covered the year from 1 January to 31 December 1999. This consolidated annual report published by the Financial Ombudsman Service covers the period from 1 April 2000 to 31 March 2001 - the formal reporting period for most of the Financial Ombudsman Service's constituent schemes - so it does not include complaints figures for the IOB relating to the first quarter of 2000. For the sake of statistical completeness, 1,842 new cases were received by the IOB during the three month period, 1 January to 31 March 2000.

The work of the insurance division is featured in the quarterly insurance division issues of ombudsman news which replace the three-monthly Bulletins formerly published by the IOB. Ombudsman news provides feedback on the types of complaint handled over the preceding quarter and reports on some of the major themes that have emerged. The publication includes case studies and commentary.

We hope that ombudsman news will provide a helpful source of reference and that our views will feed directly into firms' own handling of complaints. Please contact our communications team (phone 020 7964 0092) if you would like to go on our mailing list to receive future copies.

image: consumer factsheets

about us

the board

board members of the Financial Ombudsman Service

organisation chart

the structure within the Financial Ombudsman Service