Twenty-five years ago this month the first private sector ombudsman scheme in the UK – the Insurance Ombudsman Bureau – was founded. So we are now able to look back on a quarter-century of independent dispute-resolution in the financial services sector.
The Insurance Ombudsman Bureau opened its doors in April 1981 with James Haswell as its first ombudsman. It was a genuine example of cooperation between the insurance industry and the consumer movement. The idea was simple: customers would have the right to refer complaints that their insurer couldn't resolve to an independent ombudsman, to be judged impartially, privately, free of charge – and outside the court system. Insurers would pay the costs of the scheme that would bring finality to the individual disputes that can arise between retail consumers and large organisations.
The key elements of the new scheme had been put together in discussions between insurance representatives and officials from the National Consumer Council. The latter included Richard Thomas, now the Information Commissioner, who later became a founder member of the Financial Ombudsman Service board. The main features of the scheme were that:
These were radical ideas at the time, but the ground-breaking Insurance Ombudsman Bureau was swiftly followed by other similar bodies – in the shape of the Banking Ombudsman and the Building Societies Ombudsman – and then by the ombudsman schemes covering the investment industry.
Six years ago, with the advent of a single financial regulator, these separate ombudsman schemes merged under a statutory framework to become the Financial Ombudsman Service. But the model of industry-funded out-of-court dispute resolution, established with the Insurance Ombudsman Bureau, has remained almost exactly the same. Even the maximum award the ombudsman can make – £100,000 – remains the same as in 1981.
Of course, consumer and industry expectations have changed in 25 years, but the role of a private sector ombudsman is now well-established. Nearly every Commonwealth country has financial ombudsmen, and the EU encourages member states to have ‘out of court dispute-resolution’ schemes in place for consumer complaints. In the UK we now have an Estate Agents Ombudsman and a Telecommunications Ombudsman, among others. The legal profession is to have a scheme modelled on our own, and the Department of Trade and Industry is proposing ombudsmen to cover the energy and postal sectors. The institution is here to stay.
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.