April / May 2011
ombudsman focus: compensation for distress, inconvenience or other non-financial loss
In response to demand from many businesses and consumer advisers, this ombudsman focus outlines our long-established approach to the awarding of compensation for distress, inconvenience or other non-financial loss – and provides some illustrative case studies.
There is more information on this topic in the online technical resource on our website.
Where we uphold a consumer’s complaint (wholly or partly), we consider whether it is appropriate to tell the financial business to pay the consumer compensation for distress or inconvenience it has caused. We do this even if the consumer did not specifically ask us to do so. Exceptionally, we may also tell a business to pay compensation for distress and inconvenience it has caused by particularly poor handling of a complaint, even if we do not uphold the underlying complaint itself.
We will not automatically award compensation just because the consumer has experienced some distress or inconvenience – it has to have been caused by the financial business. And we are unlikely to say that compensation is appropriate where the degree of inconvenience or distress appears to be slight.
All of us may experience some inconvenience in our day-to-day lives when dealing with organisations and businesses. For example, the fact that a phone line is busy or that a name is not spelt correctly can be annoying – but neither situation is likely to result in compensation (although this could be appropriate if the problem persists).
Where the degree of distress, inconvenience or other non-financial loss is sufficient to warrant compensation, the amount is generally likely to be modest. Most compensation is for less than £300 and in only a small number of exceptional cases does it exceed £1,000. Cases involving pain and suffering are likely to lead to higher compensation than those involving distress or inconvenience.
The following examples illustrate our general approach to compensation for distress and inconvenience and other non-financial losses. They reflect actual decisions made by ombudsmen. Assessing the appropriate amount in individual complaints depends on the circumstances of each case.
In certain circumstances, repeated or aggravated errors may cause more distress and/or inconvenience than an isolated error – as reflected in these example case studies.
cases where the ombudsman awarded modest compensation (less than £300)
- Mr F decided to close his savings account, so he visited a local branch of his bank. He completed and signed a form and was told that the account would be closed later that same day.
The bank then failed to take any further action. Mr F had to make a number of phone calls to the bank – and return to the branch to complete the paperwork again – before his account was finally closed.
- Miss Y made a claim under her car insurance policy after she was involved in a road traffic accident. Her policy said that the insurer would provide alternative transport while her car was being repaired. However, she had to wait more than a week before the insurer arranged a hire car for her.
During that time, she had considerable difficulties getting to work, as she lived in a rural area with poor public transport. The insurer eventually reimbursed her bus and taxi fares for the time when she was without a car, but she had still suffered inconvenience.
- When Mrs D’s investment bond matured, she gave written instructions to the investment business to transfer the proceeds into her bank savings account. She checked with her bank several weeks later and found the money had never been transferred. She then had to contact the investment business several times before it finally transferred the money, more than two months after the date when it had originally said this would happen.
cases where the ombudsman awarded significant compensation (£300 – £999)
- Mr and Mrs K’s house was flooded by a burst pipe which caused serious damage. Their insurer did not arrange and pay for alternative accommodation for them and their two young children – although their home insurance policy said it would do this. As a result, the whole family had to share a room in a relative’s house for over two weeks.
- The business that provided Mrs C’s personal pension contacted her some six months after she retired. It said it had miscalculated her pension and had been under-paying her from the outset. The period concerned included one of the coldest winters on record. Mrs C had struggled financially to keep her home warm, but could easily have afforded her winter fuel bills if she had been receiving the correct pension.
cases where the ombudsman awarded exceptional compensation (£1,000 or more)
- Ms J obtained a loan with a credit provider so she could pay for a plumbing course. She contacted the provider a few months later, as she was unable to keep up with the repayments. The credit provider agreed to accept reduced repayments. However, it failed to note this on its records. Even though Ms J kept to the new arrangement, the credit provider started writing to her about her failure to keep to the initial agreement.
The credit provider knew that she suffered from serious mental health difficulties which were aggravated by stress. She explained this again – and reminded the credit provider that it had agreed new repayment terms. Despite this, she continued to receive numerous phone calls and letters demanding repayment – and she subsequently suffered a severe deterioration in her mental health.
- Mr T suffered serious injuries after falling down a flight of stairs at his hotel, while on holiday in Thailand. His doctor recommended that he should be repatriated urgently to the UK for a specialist operation.
Mr T’s wife contacted their travel insurer for help in getting him back to the UK. However, it said the hospital in Thailand had reported that Mr T was drinking heavily on the evening of his fall. This invalidated any claim relating to the accident. Mrs T said her husband never drank alcohol, and independent witnesses had confirmed that he had been sleep-walking when he fell. He had previously sought treatment from his GP for sleep-walking.
Mrs T stressed that the situation was urgent and that she could not afford to get her husband back to the UK without confirmation that the insurer would cover the costs. Despite this, it was took two weeks before the insurer contacted her again. It said it had made a mistake and now believed that Mr T had not been drinking. By then Mr T’s condition had worsened and he had undergone emergency surgery in Thailand.