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ombudsman news

issue 10

October 2001

insurers, intermediaries and the ombudsman service

The GISC (General Insurance Standards Council) code for private customers is starting to have a significant role in our casework. This new Code builds on the position established under the ABI (Association of British Insurers) Code of Practice. Our initial assessment is that - so long as the GISC code is widely adopted and complied with by intermediaries and insurers - it should enhance the protection available to customers. As a matter of good industry practice, we would expect all firms that are covered by the Financial Ombudsman Service to observe the Code and to take reasonable steps to ensure that other firms involved in selling their policies do so as well.

Customers often contact us with complaints that turn out to be about an intermediary or other company that is not covered by our jurisdiction. At present, few intermediaries are covered by the Ombudsman Service and matters are made more confusing for customers by the recent growth in insurance products branded with the names of intermediaries or other firms, where the name of the actual insurer is all but invisible to the policyholder.

In many of the cases referred to us, further enquiry shows that the complaint is actually about payment of a claim by the insurer, and hence something with which we can deal. We have been looking at other circumstances where we believe it appropriate for us to investigate complaints about intermediaries or other companies that we do not cover. In essence, this will be when the company complained about acts with the authority of the insurer, or as its agent.

During many transactions, an intermediary will be acting both for the insurer and for the customer (albeit at different stages of what customers may consider a seamless single process). The position is complicated further by the fact that the precise position will depend on any agreements made between the insurer and intermediary to allow the intermediary to act on the insurer's behalf. These agreements are not usually evident to the customer or indeed always immediately apparent to us when we first look at a case.

Normally, an intermediary will be acting for its customer when it is seeking out the best quote to meet the customer's requirements. However, if it has an arrangement to generally recommend a particular insurer, then the advice it gives may be a matter for us to consider in relation to that insurer.

Similarly, an intermediary is usually acting for its customer when it receives customer policy documentation from the insurer and forwards it to the customer. But intermediaries often write motor cover notes on behalf of the insurer and some may have wider authority to prepare and issue policy documents. In these cases, we may be able to consider any resulting complaints.

Sometimes, the insurer may delegate authority to the intermediary to accept proposals and even to decide some terms. The intermediary may also have a role on behalf of the insurer in the claims process. In these cases the actions the intermediary takes on behalf of the insurer fall within our jurisdiction.

These are not the only examples where we are able to settle disputes which, initially, may appear to be directed against intermediaries not covered by the Financial Ombudsman Service. It is by no means straightforward to identify which cases we can deal with. We are therefore working closely with the GISC and its disputes resolution service to ensure cases are handled by which ever of us is best placed to deal with the matter. In the longer term, the objective must remain to bring complaints about intermediaries into the jurisdiction of the Financial Ombudsman Service.

Walter Merricks, chief ombudsman

ombudsman news gives general information on the position at the date of publication. It is not a definitive statement of the law, our approach or our procedure.

The illustrative case studies are based broadly on real-life cases, but are not precedents. Individual cases are decided on their own facts.