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annual review 2006/07

1 April 2006 to 31 March 2007

what the complaints were about

new cases by type of complaint

type of complaint 2007 2006 2005 2004
mortgage endowment cases 49%
(46,134 cases)
(69,149 cases)
(69,737 cases)
(51,917 cases)
other investment-related cases 13%
(12,429 cases)
(15,795 cases)
(19,251 cases)
(25,157 cases)
banking-related cases 21%
(20,099 cases)
(13,709 cases)
(10,491 cases)
(9,798 cases)
insurance-related cases 17%
(15,730 cases)
(14,270 cases)
(11,484 cases)
(11,029 cases)
new cases in total 94,392 112,923 110,963 97,901

what financial products the new cases involved

financial products %
mortgage endowments 49
current accounts 8.5
mortgage products 4.5
motor insurance 4.5
personal pension plans 4
whole-of-life policies 4
buildings and contents insurance 3.5
single-premium investment bonds 3
credit cards 3
loan protection insurance 2
loans other than mortgages 2
travel insurance 2
savings and deposit accounts 1.5
income protection insurance 1
other products 7.5
new cases by financial product year ended 31 March 2007 year ended 31 March 2006
mortgage endowments 46,134 69,149
current accounts
including complaints about
8,061 3,543
  • debit cards



  • direct debit and standing orders



mortgage products 4,366 3,942
motor insurance 4,230 3,372
whole-of-life policies and savings endowments 3,734 4,163
personal pension plans
including complaints about
3,687 4,053
  • personal pensions



  • annuities



  • small self-administered schemes and executive pension plans



  • income draw-down



other "packaged" investment products
including complaints about
3,644 5,810
  • single-premium investment bonds
    (including with-profits bonds)



  • investment ISAs



  • PEPs



  • unit trusts



credit cards 2,731 2,124
buildings insurance 1,951 1,951
loan protection insurance 1,832 1,315
loans other than mortgages
including complaints about
1,755 1,507
  • unsecured loans



  • second charges



  • home income plans



other banking services
including complaints about
1,748 1,360
  • cheque clearing



  • money transfer



  • electronic payment



  • cash machines



  • safe custody



travel insurance 1,670 1,787
other types of general insurance
including complaints about
1,515 1,220
  • commercial policies



  • pet insurance



  • roadside assistance



  • caravan insurance



savings and deposit accounts
including complaints about
1,438 1,233
  • cash ISAs



  • "guaranteed" bonds



  • re-discovered passbooks and dormant accounts



contents insurance 1,238 1,224
income protection insurance 891 1,103
extended warranty insurance 713 543
critical illness insurance 680 799
stockbroking 599 529
legal expenses insurance 445 395
private medical insurance 388 389
portfolio and fund management 375 446
free-standing additional voluntary contribution (FSAVC) schemes 255 416
personal accident insurance 177 172
"splits" and "zeros"
(in relation to investment trust companies)
78 333
including complaints about
57 45
  • spread-betting



total 94,392 112,923

At the start of the 2006/07 financial year, we introduced a slightly different method of categorising and recording data about some cases. However, this has had no significant impact on the way in which some statistics have been presented in this year's annual review.

Given the very wide-ranging nature of the disputes we handle - from pet insurance to spread-betting - we have not included individual case studies in this annual review. The limited space in this publication means we could not give a fair and representative overview of all aspects of our work.

However, we include case studies in our regular newsletter, ombudsman news, which gives feedback on changing complaints trends, as well as commentary and briefing on our approach to different types of dispute. To join our mailing list for free copies of ombudsman news, please email All issues of ombudsman news are also available in the "publications" section of our website.

On the following pages we highlight the issues behind the key areas of complaint during the year.

mortgage endowment complaints

type of complaint %
mortgage endowment complaints 49
all other complaints 51

Complaints about the mis-sale of mortgage endowments continued to dominate our workload during the financial year 2006/07. Although the number of new disputes involving mortgage endowments fell by a third - from 69,149 cases to 46,134 - endowment complaints still accounted for half the new caseload of the ombudsman service during the year.

However, in previous years mortgage endowment disputes referred to the ombudsman service were responsible for as much as 63% of our overall workload. This anticipated - and very welcome - decrease in the volume of these cases over the year is clearly attributable to two factors: improved standards of complaints-handling by firms, in response to the programme of work set out by Financial Services Authority (FSA) in its document, mortgage endowments: progress report and next steps, published in July 2005; and the effect of "time barring", as increasing numbers of consumers reached the final date by which they must have complained.

As a direct result of the continued regulatory focus - with the FSA stressing the importance of firms handling mortgage endowment complaints fairly and properly - we saw a marked improvement during the year in the quality of complaints-handling, especially across the larger financial services groups. This, in turn, resulted in an increase in the proportion of cases where we decided that the complaint referred to us by the consumer had been properly investigated by the firm involved - and that the right outcome had been reached.

However, more than six years after the FSA published its first guidance on handling mortgage endowment complaints, a growing number of smaller firms - as well as some claims management companies - were still telling us they were unsure about our approach. This reflected the proportionate increase over the year in the number of mortgage endowment cases referred to the ombudsman service that involved smaller businesses - particularly independent financial advisers (IFAs) - with less knowledge and experience of the way the ombudsman service works.

As a result, we focused more resource during the year into providing direct support and guidance for smaller businesses - each with only relatively few mortgage endowment complaints. This has meant, however, that we have been less able to benefit from the economies of scale that applied when the majority of mortgage endowment cases related to just a small number of the largest financial services providers.

To help the growing number of smaller businesses faced with mortgage endowment complaints for the first time, we published two sets of comprehensive technical notes during the year, which consolidated much of the material that had been published over the years on handling mortgage endowment complaints. These technical notes are available in the publications section of our website.

During the year a significant number of consumers with mortgage endowments received so-called "re-projection" letters from their insurance company, telling them the final date by which they would need to have complained - before their complaints became "time barred" for good. In last year's annual review we explained that the impact these "time bars" might have on the number of complaints was unclear.

In particular, there was speculation about a possible peak in complaints - as the final date for complaining loomed for many people and consumers rushed to get their complaints in on time. In the event, no such peak materialised. Instead, there was a steady decline in the number of new cases throughout the year - as final dates for complaining passed by and firms saw their own complaint volumes start to fall.

In January 2007 the FSA published its review of firms' approach to time barring mortgage endowment complaints. The FSA confirmed that most firms were "time barring" the vast majority of complaints in accordance with its rules - and it found only a few areas where it said firms needed to tighten up procedures. These findings were generally in line with our own experience over the year. However, the rules on "time bars" - and their interpretation - remain subject to continued threats of legal challenges from firms and claims management companies.

investment-related complaints (other than mortgage endowments)

type of complaint %
whole-of-life policies and savings endowments 30
personal pensions 25
single-premium investment bonds 21
stockbroking 5
investment ISAs 4
portfolio and fund management 3
annuities 2.5
small self-administered pension schemes 1.5
income draw-down 1
other products 5

In last year's annual review, we reported a 29% decline in the number of new cases received about "packaged" investment products such as single-premium investment bonds and investment ISAs. This decline continued throughout the 2006/07 financial year - with the number of disputes referred to the ombudsman service about these products decreasing over the year by a further 37%.

This welcome drop in the number of complaints in this area - a fall of more than a half in two years - largely reflects the fact that we now rarely see cases involving "precipice bonds", which were responsible for significant increases in our workload a few years ago (for further details see our annual review for 2003/04).

The smaller firms' taskforce - the initiative we launched during the year to focus on the issues faced by small businesses in relation to complaints-handling and the ombudsman - has been particularly relevant for investment-related disputes, where 12% of the cases we deal with involve independent financial advisers (IFAs).

We appreciate the difficulties faced by some smaller firms of IFAs in handling complaints against themselves. For example, we recognise that the calculation of redress in some types of investment dispute can be particularly problematic for businesses that do not have access to in-house actuarial guidance or certain software. As part of a range of activities initiated by the smaller firms' taskforce, we therefore looked at ways of providing more practical information for smaller businesses at various stages of the complaints-handling process - including producing a series of quick guides focusing on technical issues such as calculating redress.

complaints about whole-of-life policies

complaints about whole-of-life policies and savings endowments 30
other investment-related complaints (apart from mortgage endowments) 70

During the year, we continued to receive a steady stream of complaints about whole-of-life policies. However, the overall number decreased year-on-year by 10%, following a similar pattern in the previous year.

A significant number of the disputes in this area related to so-called "reviewable" whole-of-life policies. These complaints generally involved consumers complaining that they had not been warned - at the time they were sold the policy - about the implications of the insurance company reviewing the policy later on. In the cases we saw, these reviews had resulted either in premiums being increased or benefits being reduced - which the consumers concerned saw as particularly unfair.

We consider each case on its own individual merits. As these policies are frequently used as part of inheritance-tax planning, the issues can be complex - and it can be a challenge to establish appropriate redress, where we uphold complaints of this nature.

complaints about savings endowments

We continued to receive a significant number of complaints during the year about endowment policies taken out purely for savings or investment purposes - rather than to support a mortgage. These products are sold as with-profits regular-premium policies, usually with a term of ten years.

In the cases we have upheld, we regularly found that the policies in question had very little - if any - chance of producing a worthwhile return. This was because the charges levied on the policies, including the cost of life assurance, placed such "drag" on investment performance that many consumers received less when their policies matured than the amount they had paid in premiums. In these cases we have usually decided that, on the basis of the information available at the time they were sold, the policies were unlikely to have been suitable for the purpose for which they were taken out (savings).

personal pension complaints

personal pension complaints 25
other investment-related complaints (apart from mortgage endowments) 75

Pension disputes referred to the ombudsman service mostly relate to advice given to consumers to take a particular approach in their pension planning - for example, to transfer out of an employer's scheme or the state scheme, or to use a pension as a means of repaying a mortgage. This means that related investment advice is also frequently involved - for example, advice on what investments should be held within a self-invested personal pension.

When consumers need to draw their pension there are further decisions to be made - should an annuity be bought and from where? Or should an income be taken from the fund - and if so, how should the fund be invested? In disputes about advice in these areas, the core issues are the associated risk and the overall suitability of the advice. We are careful, as ever, not to apply hindsight in what can be difficult and contentious cases - involving significant sums of money and with consequences for the consumer's financial position well into the future.

The numbers of new pension-related complaints have continued to fall gently for the third successive year. We still see some cases relating to the industry-wide Pensions Review, instigated by the regulator over ten years ago. But the number of these cases that we can deal with is diminishing. Many are now either outside the time limits set by the FSA or are cases where the redress required under the Pensions Review has already been paid.

The pension tax-changes that took place in April 2006 have not resulted in significant numbers of new complaints being referred to the ombudsman service. However, this could simply relate to the time lag we frequently see between the consumer being given advice and their later identifying that the advice may have caused a problem.

complaints about single-premium investment bonds

complaints about single-premium investment bonds 21
other investment-related complaints (apart from mortgage endowments) 79

Despite some stock-market volatility, the outlook over the year has been relatively positive in relation to single-premium investment bonds - and this has contributed to a continued decline in the number of complaints to the ombudsman service about these products. The 43% fall in the number of new cases during the year follows a 28% decrease in the previous year.

However, so-called "market value reductions" (MVRs) continue to be applied to some with-profits bonds when consumers cash them in - and this is a source of continued customer dissatisfaction. We are now well used to dealing with complaints from consumers that they were not told about the possibility of MVRs when they bought the bonds - or that the impact of MVRs was under-played. As we have explained in previous annual reviews, we deal with these disputes on the basis of the facts and circumstances of each individual case.

During the year we have also received complaints from consumers who are unhappy that improved stock-market conditions have not been reflected in the amount they receive, when they surrender their bond and find that an MVR has been applied. In these cases, the complaint is effectively about the way that the fund in which the bond is invested is being managed.

As part of the "wider implications" process - that we run jointly with the FSA, to deal with complaints that potentially concern both the ombudsman and the regulator - we and the FSA agreed a procedure in 2005 for handling disputes about "closed" with-profits funds, where we receive complaints relating to so-called "management actions" taken by a fund. We explained this procedure in last year's annual review. In response to new complaints we received during the year about funds that are still open to new business, we and the FSA extended this procedure in 2006 to include open funds as well as closed funds.

This means that in these circumstances, the FSA takes an overview as to whether the investment approach taken by a particular fund properly represents the legitimate exercise of its commercial judgement - taking into consideration the interests of all its policyholders as a group. The FSA then passes us relevant information about the view it has taken at a general level about that particular open fund - so that we can consider, in an individual case, whether the fund's investment decisions should be regarded as a legitimate business decision. If we believe this is so, we will not investigate an individual complaint, because we are satisfied the broader issues involved are general matters for the regulator.

other investment-related complaints

The total number of disputes relating to investment services such as stockbroking and portfolio management - rather than to "packaged" investment products such as single-premium investment bonds and whole-of-life policies - has barely altered year-on-year. However, the underlying pattern of complaints has shifted slightly, with a proportionate rise in cases involving higher-risk specialist investments such as contracts for differences and shares in smaller companies listed on London's Alternative Investment Market (AIM) exchange.

This shift may reflect the fact that in a generally rising market - when more traditional investments such as direct equities, investment trusts and unit trusts perform well - consumers tend not to question the suitability of the investment management or advice they receive. Increased confidence in benign markets also tends to lead more people to accept advice to enter into higher-risk investments - which may not then meet expectations.

Over the year we have handled cases about both direct advice given to consumers, and the way in which portfolio managers have exercised discretion in making investment decisions on behalf of consumers. Both sides in these disputes usually feel very strongly about the outcome. For consumers, the funds may represent most of their (non-property) assets. For businesses, the complaint may seem to call into question the professionalism of an individual manager. For this reason, a relatively high proportion of these cases are finally settled only with an official decision by an ombudsman - rather than at an earlier, less formal stage involving conciliation.

We have also continued to receive complaints relating to administrative issues involving stockbroking and portfolio management. Most frequently, these disputes concern the way in which consumers' instructions have - or have not - been acted on.

banking-related complaints

current accounts 40
mortgage products 22
credit cards 13
loans other than mortgages 9
other banking services 9
savings and deposit accounts 7

current account complaints

current account complaints 40
other banking-related complaints 60

The number of disputes referred to the ombudsman service about current accounts more than doubled during the year - following a substantial 40% increase in the previous year. This increase has been driven by the flood of enquiries and complaints about current-account charges for customers who go overdrawn without prior authorisation.

In response to high-profile and prolonged media and internet campaigns, our consumer helpline has received up to 3,000 enquiries a day about bank charges. By the end of the financial year, significant numbers of these enquiries were turning into formal complaints requiring our intervention. At the end of March 2006, we were handling fewer than 10 disputes a week about bank charges. A year later, in March 2007, the number of these cases had escalated sharply to 500 a week.

Following our intervention, the current-account providers concerned have so far refunded the disputed charges in every case - so we have never reached the stage of making a detailed investigation or decision about these types of charge. We stand ready, however, to intervene more formally - making official decisions as necessary - if circumstances require this.

Meanwhile, the Office of Fair Trading (OFT) is considering the wider issues involved in retail bank pricing. The OFT is separate from the ombudsman service and has different powers from us. Unlike us, the OFT does not deal with individual customer complaints. 

We have also received complaints from consumers who had challenged these charges and received refunds from their current-account providers - but were then given notice that their accounts were to be closed. In some of these cases, we considered that the current-account provider had decided to close the account purely because the customer had raised a complaint, which we felt was unfair.

Another category of complaint involving current accounts - where we have received an increased number of complaints over the year - involves the so-called "upgrading" of ordinary current accounts to fee-bearing accounts with added benefits. These complaints are from consumers who said either that their accounts had been upgraded without their knowledge, or that the fee structure had not been made clear to them.

complaints about mortgage products

complaints about mortgage products 22
other banking-related complaints 78

Mortgage complaints have increased by 11% during the year - following an increase of a third in the previous year. Disputes involving mortgage-related charges have continued to feature among these complaints. The issue of the fairness of "mortgage exit" administration fees - the charge that the lender makes when consumers repay their mortgage - was considered during the year under the "wider implications" process that we operate jointly with the Financial Services Authority (FSA).

This "wider implications" process was set up, after public consultation, to help identify and deal with issues relating to regulation and redress which affect, for example, a significant number of consumers and/or businesses and involve a common industry practice.

In January 2007 the FSA issued a statement of good practice to mortgage lenders, which set out some areas of potential unfairness in the way these fees were set and raised - and suggested a range of options that lenders might adopt, where customers (or former customers) query the fee they have been charged. We believe this is likely to reduce the number of complaints which the ombudsman service receives in future about "mortgage exit" administration fees - although we will still continue to deal with individual complaints that consumers refer to us.

During the year we have also received a growing number of complaints about the fairness of "mortgage arrears" administration fees.

This has been our second complete year of handling complaints involving mortgage intermediaries - who came under our remit on 31 October 2004. Many of the cases we have seen this year about intermediaries relate to fees associated with arranging and setting up mortgages, and the disputes frequently turn on whether these were properly explained to the customer at the outset.

The range and complexity of residential mortgage products continues to grow, and lenders continually review and refresh the features of their product portfolios. So it is not surprising that a significant number of the cases we see involve disputes about what the clauses of the mortgage actually mean - and whether they were adequately explained by the lender or intermediary involved.

credit card complaints

credit card complaints 13
other banking-related complaints 87

The 29% rise in complaints to the ombudsman service about credit cards results primarily from the continuing impact of card fraud. A substantial number of these cases related to disputed point-of-sale purchases and cash machine withdrawals. The widespread use of "chip and PIN" technology as a security feature in card transactions does not seem to have reduced our workload in this area. However, the enhanced audit trail created by "chip and PIN" is often helpful to us in our investigation of these complaints.

We continue to receive a substantial number of disputes relating to section 75 of the Consumer Credit Act 1974 - under which the credit-card provider may be jointly liable with the supplier of the goods or services, if a consumer has a valid claim for misrepresentation or breach of contract. During the year, cases involving claims under section 75 have included a significant number of complaints from consumers who have used their credit card to buy membership of "holiday clubs" offering deals on flights and accommodation - deals that apparently prove not quite so advantageous when actually booked.

We also continue to see a growing number of complaints from consumers who have taken up special credit card offers, typically involving the card-issuer offering a "0% deal" for a specific period on outstanding balances transferred from another card account. Based on the disputes we deal with, it appears that many consumers have difficulty understanding how their repayments will be applied to the transferred balance and at what point interest will start to be charged on the debt.

complaints about loans (other than mortgages)

complaints about loans other than mortgages 9
other banking-related complaints 91

In last year's annual review, we commented on the increasing number of disputes brought to us about loans that consumers felt had been unaffordable from the outset. This trend has continued during the year. Cases we have dealt with have included disputes about the way in which debts have been re-scheduled - sometimes leaving the consumer in no better position than before. In many cases, these disputes also include claims that the lender has not acted fairly in negotiations about repayment of the debt.

complaints about savings accounts

complaints about savings and deposit accounts 7
other banking-related complaints 93

Consumers continue to bring complaints to the ombudsman service about their bank or building society introducing new savings accounts that offer better rates of interest than their older "superseded" accounts. Although, over the years, the provisions of the Banking Code which set out how customers should be notified about interest-rate changes have improved, the disputes we see indicate that many savers still see this as a problem area.

We have also continued to receive complaints about the sale of "guaranteed-capital bonds" - something we have commented on in our last two annual reviews. These bonds involve a guarantee that the original capital will be returned in full at the end of the bond's term - so they are technically "deposits" rather than "investments". This means that the FSA's rules on the sale and marketing of investments do not apply.

However, the amount of interest earned on "guaranteed-capital bonds" is generally dependent on the movement of a specified investment index. This leads some consumers to believe that these bonds are regulated "investments". In the disputes that are referred to us to settle, consumers often argue that they were encouraged to take out these bonds on the back of misleading assurances about the level of interest they are likely to receive.

Newer savings products with complicated interest-rate structures - including those that require the consumer to take various steps in order to achieve the advertised "headline" rate - have started to give rise to complaints this year. In particular, consumers have complained to us where these steps include having to give notice if they want to move their money elsewhere without forfeiting interest.

complaints about other banking services

During the year we have seen a significant number of complaints from consumers who have fallen victim to a widespread scam involving fraudsters who pose as buyers of goods and then pay with a stolen or counterfeit cheque. Innocent sellers release the goods at the point they expect the cheque to have "cleared" - only to discover a day or two later that the cheque was fraudulent.

In these circumstances, consumers normally complain to us where they believe that the bank told them - or allowed them to believe - that the cheque in question had been paid. They argue that they would not have released the goods until they were certain the cheque would not bounce - if the bank had been clearer in its communications.

These complaints highlight the continuing difficulty experienced by many consumers - and by many bank employees - in understanding and explaining how the cheque-clearing system works. This may explain the 17% increase in cases referred to the ombudsman service during the year about cheque clearing.

Against the background of these complaints, we welcome the certainty that consumers will gain through the measures to be adopted by November 2007 in relation to cheque clearing. These measures follow the report published by the OFT's Payments Systems Task Force, which agreed to introduce a maximum time-limit in which a cheque may be returned unpaid.

During the year we have also received a steady stream of complaints from people who have bought or sold items on internet-based auction-sites using electronic payment facilities. The number of these disputes referred to us doubled during the year.

Many of these complaints relate to alleged fraud by the person with whom they dealt to buy or sell the goods, rather than by anything the electronic-payment provider had done wrong. However, we also see complaints where the consumer argues that the information they were given by the electronic-payment provider was misleading or unclear - as well as disputes about so-called "claw-back" by the electronic-payment provider of money already received.

insurance-related complaints

motor 27
buildings 12.5
loan protection 11.5
travel 10.5
contents 8
income protection 5.5
critical illness 4.5
extended warranty 4.5
commercial 3.5
legal expenses 3
private medical 2.5
pet 1.5
personal accident 1
other 4.5

motor insurance complaints

motor insurance complaints 27
other general insurance complaints 73

The number of motor insurance disputes referred to the ombudsman service increased by a further 25% this year - following an increase of 31% in the previous year. We continue to see a very wide range of issues and concerns emerging from our work settling complaints relating to car and motorcycle insurance.

However, the majority of cases involve disputes about the repair of vehicles following an accident; the alleged failure by drivers to fully disclose relevant information to their insurance company; and the valuation of cars that are written-off as a total loss.

It is particularly disappointing that we continue to see so many poorly-handled complaints about write-off values in relation to motor insurance policies. The ombudsman's general approach to settling disputes about the valuation of cars that have been written-off is well established. We believe that any insurer in the motor business should be capable of offering a fair price where a vehicle is a total loss - using the methodology and tools that have been available to the sector for many years and following the standards of good faith that have long applied to insurance.

For consumers, the valuation of cars remains a problematic issue, given the frequent difficulty of finding an identical match for the car concerned, and the discrepancy between prices advertised - for example, on garage forecourts, on the internet or in local newspapers - and the actual agreed selling price of a vehicle. However, in many cases, a clear explanation from the insurance company about their approach to valuation might have been enough to have prevented the misunderstanding about this escalating into a dispute.

We are also seeing an increasing number of enquiries and complaints about the way in which insurers operate their no-claims discount policy.

complaints about buildings and contents insurance

complaints about buildings insurance 12.5
complaints about contents insurance 8
other general insurance complaints 79.5

The number of disputes to the ombudsman service about household insurance has remained remarkably steady year-on-year - with exactly the same number of complaints about buildings insurance and just 14 more complaints about contents insurance than in the previous year. We are optimistic that this results from the successful dialogue we continue to have with insurers and intermediaries in this market. Consumers' increased familiarity with - and confidence in - the way these policies work might also be helping to reduce the number of misunderstandings leading to disputes.

Certainly, we are aware of significant improvements in recent years in the clarity of many policy documents relating to buildings and contents cover. This is a major step forward for consumers, who are not only more likely to understand a clear, well written policy - but should also have more realistic expectations of what the policy will cover in the event of a claim.

Disputes involving claims for subsidence remain some of the most difficult and time-consuming insurance cases we handle. In a recent issue of ombudsman news (issue 59), we published a selection of case-studies involving subsidence, to show the types of issues and problems these disputes entail. Subsidence is one of several areas of household insurance where the size and complexity of the disputed claim - and the extent of the damage to the consumer's home - means that, if the ombudsman did not exist as an alternative dispute-resolution service, these cases would probably only be capable of being settled in court.

We continue to receive a significant number of insurance complaints about the quality of repairs to properties under household polices and the timescales involved in repair work.

loan protection insurance

complaints about loan protection insurance 11.5
other general insurance complaints 88.5

During the year we have seen a significant increase in the number of disputes referred to the ombudsman service about loan protection policies (sometimes called PPI - payment protection insurance). However, the 39% increase in the number of these cases is still surprisingly low, given the extent of adverse publicity that payment protection insurance has attracted in the media throughout the year.

On the basis of the cases we continue to see, we share many of the concerns of commentators about the sale of this product. We have reviewed and strengthened our complaints-handling process for loan protection disputes, so that we will be able to deal efficiently with any significant future increases in the volume of these cases - which many people are now predicting.

The disputes we deal with relating to loan protection insurance usually arise at the point when the consumer makes a claim on the policy - and the claim is turned down. However, the increase in the number of loan protection cases this year reflects a new type of complaint, as we start to see more disputes about the original sale or about the administration of these policies. The issues include complaints that a policy had not been requested; that the consumer is unable to get a refund (or an acceptable level of refund) if the loan is repaid early; that the total cost of the insurance was concealed; and that the policy was sold to someone who already had insurance cover.

It is clear from the complaints we handle that there are particular problems relating to payment protection policies that require a single up-front premium - funded by a loan and involving specific costs or difficulties if the policy is cancelled early (for example, if the loan is repaid early on). We have shared our concerns about this with the FSA, as part of its continuing review of loan protection.

travel insurance complaints

travel insurance complaints 10.5
other general insurance complaints 89.5

Our overall workload in relation to travel insurance disputes has declined slightly this year. This is a welcome development - although based on the cases we handle, we remain concerned about difficulties that appear to exist in this market.

Policy documents we see are still often poorly written - and rarely read and properly understood by consumers, who seem happy to buy on the basis of price alone. There is clearly a mismatch in many of the complaints we deal with between what insurers intend to offer and the cover that consumers believe they are buying.

The disputes referred to the ombudsman service have frequently arisen because little or no advice was given on the policy at the time it was sold. And the fact that travel insurance is frequently sold as an add-on to other travel or financial products means there can be confusion on both sides about the exact nature of the policy cover.

The growth in popularity of annual travel policies and long-term travel cover linked - for example - to premium bank-accounts and credit cards, has led to complaints about the provisions in these policies that relate to changes in health and changes in risk during the life of the policy in question. We have made a number of decisions on the basis that insurers cannot simply withdraw cover under a policy, just because the risk of a claim has increased.

On the other hand, consumers cannot expect an insurance company to pay out when they have carried on with their travel plans in the face of a doctor's clear advice not to travel - or when their behaviour on holiday goes beyond the exuberance that might be associated with holiday high-spirits.

Around one in five of the travel-insurance complaints we see arise from the sale of policies by intermediaries - travel agents - who are not regulated by the FSA and are therefore not covered by the ombudsman service. We cannot help in these cases. During the year we responded to the review carried out by HM Treasury into regulation and complaints-handling in relation to this sector.

health insurance complaints

income protection 5.5
critical illness 4.5
private medical 2.5
other general insurance complaints 87.5

We are pleased to record a 17% decline in the number of disputes we received during the year relating to income protection and critical illness insurance. This follows what has previously been a steady pattern of year-on-year growth in the number of health insurance complaints.

Disputes relating to health insurance involve some of the most distressing and complex cases we deal with. Assessing the relative disability of an individual - or the accuracy of medical information given in the past by someone who is now critically ill, dying or bereaved - is challenging and stressful for everyone involved.

Our work in achieving a fair outcome in cases such as these is hindered by the clear injustice of the law in relation to "non-disclosure" in consumer insurance-contracts. The law - as it relates to consumers not disclosing information to their insurance company - was developed over two centuries ago. There have been calls for reform for over half a century from all quarters, including the judiciary itself. Although we are working extensively with the Law Commission in this area, actual reform may well yet be some years away.

The Financial Ombudsman Service and the insurance industry have, in the meantime, adopted an approach to cases involving "non-disclosure" that differs significantly from the strict legal position - and is considerably more favourable to consumers. This is to the credit of the insurance industry, which has maintained and developed this approach to "non-disclosure" for over two decades.

However, on the basis of the disputes we see, we remain concerned that what some insurers require consumers to disclose about their health is probably beyond many people's capability and comprehension - especially in the context of a sales process that is hardly conducive to the serious consideration of complex questions about medical history. Many surveys carried out in this area suggest that a significant proportion of people acting honestly and in good faith are unable to provide accurate information about their medical history - and those advising on and selling health policies are in many cases confused or poorly trained, and only contribute to the misunderstandings.

For many consumers, an application for critical illness and income protection policies has become an examination or a memory test, the results of which are only revealed if the consumer ever comes to make a claim. It seems unacceptable that many consumers are then left, at their time of greatest need, without the insurance cover they have paid for and relied on for many years. Cases such as this continue to provide a regular source of damaging publicity that undermines public trust and confidence in insurance products generally.

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This annual review is published in accordance with paragraph 7 of schedule 17 of the Financial Services and Markets Act 2000.