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lessons from complaints

ombudsman Tony Boorman talks at the Office of Rail Regulation's annual conference - on how ombudsmen help to make markets work fairly for individuals with problems

London, March 2014

Thank you for the opportunity to open your seminar on how the rail industry can move complaints handling away from a “process-based” approach towards a culture of customer service.

At first sight you might wonder what the Financial Ombudsman has to say about railways and customer experience. I could, of course, tell you about my own experiences - some good some not so - as a long-distance commuter and occasional leisure traveller on Britain’s railways.

But that’s not why I’m here today. Instead, I want to prompt you to think about how complaints and consumer problems - when resolved by an independent person - can be used as a valuable tool to help:

  • improve the service you offer;
  • regulators tackle poorly performing businesses; and last but far from least
  • give customers - passengers -confidence that if something goes wrong, it will be put right promptly and fairly.

what’s “alternative” about “ADR”?

This is an issue that the government itself is looking at in the consultation launched just this week on “alternative dispute resolution” (ADR) for consumers.

In this government consultation Jenny Willott MP, the minister for employment relations and consumer affairs, draws particular attention to the work of the Financial Ombudsman Service as the prime example of one the UK’s longest-established and well-regarded “ADR” schemes.

Ombudsman schemes now cover much - but not all - of the regulated sector, as well as other crucial parts of the consumer landscape. And a lot of the ombudsman world will be very familiar to you.

We are free to consumers and paid for by the industry. We are impartial and open to all. We encourage customers to try to sort out matters first of all with the business they’re unhappy with - before we step in.

But what makes ombudsmen in the regulated sectors different is that they have real powers to resolve complaints. Ombudsman findings are binding on the business if accepted by the consumer. In the case of the Financial Ombudsman Service, this is up to a maximum of £150,000.

But the consumer doesn’t have to accept our decision - and if they don’t, they can pursue their grievance with the financial business in the courts in the old fashioned way.

our work

In her introductory words to the consultation, the minister is kind enough not to draw too much attention to the fact that the Financial Ombudsman Service is also by far the largest provider of ombudsman services in the UK.

That probably says at least as much about financial services and its regulation over the past decade as it does about the ombudsman service itself. We are currently facing the consequences of the mis-selling of many financial products on an industrial scale - notably payment protection insurance (PPI) - as well as the consequences of the past failure of regulators and financial businesses to address the problems head on.
But PPI is far from the only thing we do. Our work is about the day-to-day experience of consumers and financial services. So everyday things like:

  • “Will my flood claim be paid?”
  • “Is my written-off car really worth that little?”
  • “Is the payday lender acting fairly in handling my debts?”
  • “Was this investment advice really right for my needs?”

First things first. Whether you’re a bank or insurance company, a pawnbroker or a rail operator, things can and do go wrong. Any organisation that offers a crucial service to consumers will make mistakes.

Even where a mistake isn’t made, customers will often want assurance that they aren’t being misled or treated unfairly. So it’s natural that they might fret about things like:

  • “Do pensions really work like that?”
  • “Surely I’m allowed to stand in a first-class carriage on a packed train?”
    (and please don’t quote the National Rail Conditions of Carriage back at me!)

The ombudsman is there to handle disputes that the business itself hasn’t been able to resolve. We look at complaints to decide what is “fair and reasonable” in all the circumstances of the case. This includes taking into account the rules, regulatory codes and the like.

But - deliberately - we’re not bound by these things. We’re charged with being informal and accessible for customers. And most of our cases are simply about applying common sense.

learning from complaints - a business case

So what can businesses learn from what the ombudsman does? What can be learnt from complaints? And what does all this tell regulators and consumer groups about the businesses that consumers complain about?

The business case for thinking about complaints and their root causes has been well made by many others. But in brief, complaints drive dissatisfaction and provide a strong motivation for customers switching services (if they can). In contrast, if a customer’s complaint is handled well, we all know that it can increase substantially that customer’s loyalty.

But a sensible chief executive of any service-led business knows that only a small proportion of unhappy customers will ever actually take the time and trouble to complain. Some of us may moan at the ticket collector or station staff. More of us will probably moan to colleagues and family. But few go home, pick up their pen and write a formal letter of complaint.

And that’s a shame. “Big data” on complaints can help a business identify just what it’s doing to annoy its customers - what practices and procedures cause confusion - and what really gets up its peoples’ noses.

All this matters - because an awful lot of it you can put right. Simply - and at low or no cost. Looking at the root cause of complaints can be a hugely useful tool in service-improvement initiatives. And often in cost-improvement and “lean” work too. Customers hate inefficient service delivery just as much as your accountant does.

Ombudsmen services feed back what they see - first, in the individual complaint to the parties involved, and second, more widely to the whole sector. We publish:

Many of these individual pieces of feedback may at first sight sometimes seem trivial. But they can make a real difference to customers and businesses.

So thinking about complaints, and encouraging your customers to give critical feedback, is something the best businesses can and should do. A business that listens to complaints and learns can gain real advantages.

But let’s get real. Not all businesses are saintly. Some businesses will cut corners to earn short-term financial or competitive advantage. Perhaps I’m wrong, but would I go out of my way as a rail operator to remind customers of their rights to compensation under the National Rail Conditions of Carriage “Delay Repay” scheme?

I’m sure you all highlight this information clearly, of course. But it’s easy to see why others might succumb to the temptation to hide away that expensive and inconvenient truth. Or simply to invent barriers to making claims designed to be within the letter but far from the spirit of the scheme.

The Financial Conduct Authority’s recent work on behavioural economics illustrates some of the opportunities and temptations here. Even a letter from a business written jointly with the regulator - which in effect offered customers a refund on an insurance premium typically worth £20 - solicited a response rate, at best, of just 12%. Customer inertia is an important reality for unscrupulous businesses to exploit to their commercial advantage.

That’s one reason why any ombudsman service needs to be open and accessible. Ready when customers want its help and ready to help in the way customers really want.

“qual” not “quant”

You will have noticed that, so far, I’ve said little about the “metrics” of complaint handling. Well, certainly, we publish a great deal about just that: how many cases we receive by business and by product area. And we also publish how many cases we uphold - that is, where we require the financial business to change its mind.

At some level, these metrics can tell you something. Last year (2013), for example, saw our busiest ever year - with 576,000 complaints referred to us by consumers, up a third on the previous year.

And while our latest published data shows that we upheld only one in ten of the complaints we resolved about Nationwide Building Society, that figure was nearly eight out of ten complaints in the case of Barclays plc.

But equally there is a danger of businesses becoming too fixated by the data. Complaints are qualitative judgements. One really serious case may tell you far more about a business than dozens of straightforward ones. And targeting ever falling complaint numbers and lower “uphold” rates may have the unintended consequences of encouraging businesses either to make it harder for their customers to raise grievances or to settle cases that they should defend.

So whether your role is in a business or in regulation - when you think about how you use complaint insights, please think less about the quantitative and more about the qualitative judgements required.

And that again is where an ombudsman can help. We don’t have a particular axe to grind. We’re not there to represent customers, or businesses, or regulators. We can and do speak plainly about what we see. Good and bad.


So complaints are great insights that businesses can use to improve services and customer loyalty. We should stop worrying too much just about how many complaints are made. Arguably, services like yours receive too few anyway.

I think we should be doing more to encourage us British to overcome our apparently inbred reserve about “making a fuss”. Please go for it! After all, by complaining we can help create a virtuous circle of service and cost improvement, as well as fair trading.

But no good complaints system can work well without a backstop. An impartial arbiter ready to tackle all the problems that customers and businesses cannot sort out between themselves.

So an active and resilient ombudsman service is part of the assurance to the market that good, innovative, customer-focused businesses can flourish. An assurance that every customer can access redress when it is due. And that businesses will see the consequences if - whether through carelessness or design - they treat individuals unfairly.

A regulator can and should do much. But its assurances work in the world of rules and generality. An ombudsman brings those safeguards to life for the individual.

image: Tony Boorman

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