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annual review 2007/08

1 April 2007 to 31 March 2008

what the complaints were about

new cases by area of complaint

type of complaint 2008 2007 2006 2005
mortgage endowments 11%
(13,778 cases)
(46,134 cases)
(69,149 cases)
(69,737 cases)
investments and pensions 10.5%
(12,787 cases)
(12,429 cases)
(15,795 cases)
(19,251 cases)
banking and credit 56.5%
(69,238 cases)
(20,099 cases)
(13,709 cases)
(10,491 cases)
insurance 22%
(27,286 cases)
(15,730 cases)
(14,270 cases)
(11,484 cases)
new cases in total 123,089 94,392 112,923 110,963

what issues the new cases involved

mortgage endowments: 11%

of which

  • complaints about sales and advice: 96%
  • other complaints: 4%

investments and pensions: 10.5%

of which

  • complaints about sales and advice: 63%
  • complaints about administration: 31%
  • other complaints: 6%

banking and credit: 56.5%

of which

  • complaints about charges: 71%
  • complaints about administration: 15%
  • complaints about transactions: 6%
  • complaints about sales and advice: 4%
  • other complaints: 4%

insurance: 22%

of which

  • complaints about claims: 62%
  • complaints about sales and advice: 24%
  • other complaints: 14%

what financial products the new cases involved

financial products %
current accounts 32
credit cards 11.5
mortgage endowments 11
payment protection insurance (PPI) 8.5
mortgages 5.5
motor insurance 5
personal pensions 4.5
whole-of-life policies and savings endowments 3
unsecured loans 2.5
savings & deposit accounts 2
buildings insurance 2
travel insurance 1.5
contents insurance 1
with-profits and unit-linked bonds 1
income protection insurance 0.5
extended warranty insurance 0.5
critical illness insurance 0.5
other products 7.5

new cases by financial product or service

new cases by financial product or service year ended 31 March 2008 year ended 31 March 2007
current accounts
including complaints about
39,263 8,061
  • charges



  • direct debits and standing orders



credit cards 14,123 2,731
mortgage endowments 13,778 46,134
payment protection insurance (PPI) 10,652 1,832
mortgages 6,824 4,366
motor insurance 6,009 4,230
personal pensions
including complaints about
5,297 3,687
  • personal pension plans
2,211 1,701
2,183 954
  • annuities
383 321
  • small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs)
299 171
  • income drawdown
88 142
whole-of-life policies and savings endowments 3,211 3,734
unsecured loans 2,940 1,755
other "packaged" investment products
including complaints about
2,750 3,644
  • with-profits and unit-linked bonds
1,192 2,601
  • investment ISAs
729 521
  • guaranteed-income bonds
296 113
  • PEPs
162 174
  • unit trusts
114 100
savings and deposit accounts 2,675 1,438
buildings insurance 2,669 1,951
other banking services
including complaints about
2,643 1,748
  • cash machines
883 291
  • cheque clearing
612 547
  • electronic payment
502 369
  • money transfer
415 378
  • safe custody
52 46
other types of general insurance
including complaints about
1,710 1,515
  • commercial policies
368 520
  • pet insurance
329 273
  • roadside assistance
218 202
  • caravan insurance
64 77
travel insurance 1,628 1,670
contents insurance 1,363 1,238
consumer-credit products and services
in relation to activities covered since April 2007 by our consumer credit jurisdiction - including complaints about
849 (not covered by the ombudsman service before April 2007)
  • hire purchase
  • debt collecting
  • point-of-sale loans
  • store cards
  • catalogue shopping
income protection insurance 832 891
stockbroking 776 599
extended warranty insurance 701 713
critical illness insurance 638 680
legal expenses insurance 474 445
portfolio and fund management 433 453
private medical insurance 369 388
personal accident insurance 238 177
free-standing additional voluntary contribution (FSAVC) schemes 171 255
including complaints about
73 57
  • spread-betting
58 36
total number of new cases 123,089 94,392

banking and credit

type of complaint %
current accounts 57
credit cards 20
mortgages 10
unsecured loans 4
savings and deposit accounts 4
other banking services 4
consumer credit* 1

*covered by our consumer credit jurisdiction (eg hire purchase, debt collecting and store cards)


current account complaints

year ended 31 March number of complaints
2008 39,263
2007 8,061
2006 3,543
2005 2,521
2004 2,106
2003 1,602

The five-fold increase in current account disputes during the year was driven by the wave of complaints about charges incurred when an overdraft limit is exceeded.

Following the "test case" in the High Court announced by the Office of Fair Trading (OFT) in July 2007 - which is expected to clarify the law in this area - and a complaints-handling waiver issued to the relevant banks and building societies by the Financial Services Authority (FSA), we decided to put on hold most of our work on complaints relating to bank charges, while awaiting the outcome of the legal proceedings. This was in line with the approach also taken by county courts nationwide.

The High Court's decision on the first part of the legal "test case" was made public on 24 April 2008. The decision covers points of legal principle - and was not intended to provide a final answer to all the legal questions raised about these charges. While the legal proceedings continue, we have confirmed that we will continue to keep complaints about unauthorised overdraft charges on hold.

However, we have continued to deal with complaints about current-account charges where we identified issues of financial hardship affecting the consumer. In these cases, it has usually been possible to deal with all the parts of a complaint except the part that relates specifically to whether bank charges are lawful or not.

Cases involving issues of financial hardship have frequently turned out to take rather more time to deal with than we had expected. This is sometimes because the current-account provider in question was slow to take the initiative and collect from its customer the sort of financial information it needed - in order to gain a proper understanding of the customer's financial position. On the other hand, some consumers expected an automatic full refund of all charges in response to their complaint of hardship - and were reluctant to provide information about their financial position or to discuss a resolution that fell short, in their view, of what they wanted in terms of redress.

By far the largest part of our caseload of current-account disputes comprised complaints about charges incurred when an overdraft limit is exceeded. However, we continued to receive complaints about other aspects of how current accounts work. Because current accounts are normally very "active" financial products - involving frequent transactions and administrative updates - there is much that can, potentially, go wrong. This explains why many complaints we handled during the year involved delay or mistakes in the administration of the account.

The initial problem was sometimes made worse by the consumer not fully understanding how the various facilities and features of their current account actually worked - and then getting confusing (or wrong) explanations from their bank or building society. For example, confusion was often caused by misunderstandings about the time that different types of payments take to reach a current account - and about which payments may have needed additional days to "clear" before they could be drawn on. We also see many cases where there has been confusion about the different ways in which standing orders and direct debits are administered on a current account.

We often find in disputes such as these that before we can go on to decide what went wrong and who was responsible for the problem, we first need to provide clear explanations about banking procedures - something it might have been helpful for the account-provider involved to have done itself.

Another common cause of complaints about current accounts involves instructions given face-to-face or over the phone. These complaints highlight the importance - both for consumers and for banks - of communicating clearly and keeping a note of phone calls. Encouragingly, however, we received only a low number of complaints during the year from consumers who had experienced problems when switching between current-account providers.

credit card complaints

year ended 31 March number of complaints
2008 14,123
2007 2,731
2006 2,124
2005 1,599
2004 1,444
2003 864

During the year we have seen a significant number of complaints about so-called "default" charges - applied by credit card companies where the customer is either late in making their monthly payment or misses a payment. The OFT issued a statement of opinion on this in April 2006. It encouraged card issuers to calculate their costs in relation to customers' "defaults" - and it provided views on what activities might reasonably be included within those costs.

We have begun to receive complaints from consumers about increases in the interest rate charged on their credit card - where these increases reflect a change in the card issuer's view about the "risk" that the consumer represents. In these cases, we have had to consider not only whether there had been a change to the customer's risk profile, but also whether the credit card agreement made proper provision for an interest rate variation of this type.

We also continued to receive complaints about disputed credit and debit card transactions, including transactions involving cash machines. We keep up to date with technology and other developments in this area - although most of the disputes we see turn on practical issues specific to the individual circumstances of the case, rather than on complex technological points.

complaints about mortgages

year ended 31 March number of complaints
2008 6,824
2007 4,366
2006 3,942
2005 3,001
2004 3,220
2003 9,438

As we predicted in last year's annual review, the number of complaints we received about "mortgage exit" administration fees reduced during the year, following the FSA's statement of good practice to mortgage lenders. However, we still continued to receive some complaints in this area.

The number of disputes about the application of administration fees in relation to mortgage arrears increased during the year. In some cases, we questioned whether any arrears administration was actually necessary - particularly where the consumer was keeping to an agreed repayment schedule. There have also been complaints where we found that the fees charged for arrears administration were disproportionate - or manifestly unfair - in the circumstances of the particular case.

We have seen a rise in complaints about the way lenders have handled arrears problems - particularly disputes relating to the quality of lenders' communication and their willingness to be flexible. Complaints about the "advised sale" of mortgages have also risen in number - including complaints about the affordability of the mortgage when it was first taken out.

In some cases, the consumer may find it difficult to establish whether a problem has been caused by something the broker did wrong, or something the lender did wrong. This can mean we need to handle complaints against both businesses, particularly where the businesses themselves have not given clear explanations to the consumer.

complaints about unsecured loans

year ended 31 March number of complaints
2008 2,940
2007 1,755
2006 1,507
2005 1,133
2004 1,116
2003 933

Most of the complaints we received this year about unsecured loans were from consumers who were in financial difficulty - and who did not believe that their lenders were dealing fairly with them. We have commented in previous years about the rise in the number of disputes about loans that consumers say were unaffordable from the outset. This trend has continued this year.

In particular, we have seen an increase in the number of complaints about lenders' handling of payment difficulties. As with complaints relating to mortgage arrears, these disputes often turn on the standard of communication by lenders - and their willingness to be flexible, where the consumer feels they are doing what they can to address their debt.

complaints about savings and deposit accounts

year ended 31 March number of complaints
2008 2,675
2007 1,438
2006 1,233
2005 1,154
2004 806
2003 748

During the year there has been a rise in complaints about "roll-over" savings bonds. These are savings products which have a set term during which withdrawals cannot be made, except by forfeiting interest. At the end of the term, the bond "rolls over" into another term - unless the consumer instructs otherwise.

Complaints have arisen where consumers have felt that their savings institution did not explain clearly enough what would happen at the end of the term - and what the consumer would need to do, to avoid the money being tied up for another term.

We have also continued to receive complaints about savings products which offer high "headline" rates of interest - but where consumers are unhappy with the steps they have to take to secure the best rate. Cash-ISA providers continued to have complaints brought against them by consumers whose ISA applications were not processed correctly or on time - and who therefore lost out on a tax-efficient savings product for the 2007/08 tax year.

complaints about other banking services

year ended 31 March number of complaints
2008 2,643
2007 1,748
2006 1,360
2005 1,083
2004 1,106
2003 1,485

During the year we received a number of complaints about international money transfers made outside Europe. The systems used to carry out these transfers can be complex - often involving institutions other than just the sending and receiving banks - and require very accurate information. Consumers often expect these transfers to be simpler and quicker than they actually are.

Bank employees who are not familiar with this type of service may fail to recognise potential problems when consumers make initial enquiries. These transfers are sometimes for payments such as property purchase or business obligations, so the effect of a delayed or mis-directed payment can be significant.

Complaints involving problems with cheques clearing continued to be a feature this year. We saw a significant number of cases where individual consumers who had privately advertised goods for sale fell prey to fraudsters who posed as genuine but paid with a stolen or counterfeit cheque. The consumers in these cases had released the goods they were selling, at the point they believed the cheque had "cleared" - only to discover a day or so later that the cheque was fraudulent.

The new cheque-clearing arrangements, introduced in November 2007, should provide more safeguards for consumers - who are now able safely to draw on UK cheques that have not been returned by "day six" of the clearance cycle. But the success of this measure will depend not only on consumers knowing about the new rules, but also on bank staff fully understanding them - and being able to explain them correctly to consumers.

investments and pensions

mortgage endowments 52
whole-of-life policies and savings endowments 12
personal pension plans 8.5
with-profits and unit-linked bonds 4.5
stockbroking 3
investment ISAs 3
portfolio and fund management 1.5
annuities 1.5
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 1
other products 5

While the number of new complaints about the mis-selling of mortgage endowments fell by 70% during the 2007/08 financial year, the number of new complaints relating to all other types of investments levelled off - edging up by 3% after falling by around 20% in each of the three previous years.

complaints about mortgage endowments

year ended 31 March number of complaints
2008 13,778
2007 46,134
2006 69,149
2005 69,737
2004 51,917
2003 13,570

The decline in the rate of complaints referred to the ombudsman service about the mis-sale of mortgage endowments accelerated during the year - with the number of new cases dropping by 70%, following a fall by a third in the previous year. This means that the level of mortgage endowment complaints is now at its lowest since the 2002/03 financial year.

In earlier years, we were receiving over 250 mortgage endowment complaints every working day - around two-thirds of our total workload. But in the first half of the 2007/08 financial year, mortgage endowment cases represented only around 12% of all new complaints. And by the final quarter of the year, this figure had decreased to 8%.

The fall in the number of these complaints has resulted primarily from the impact of the "time bars" that now apply to many consumers with mortgage endowments. As we reported in last year's annual review, the potential rush to complain before the deadline did not transpire. However, we continued to see a number of cases where the consumer's deadline for complaining had passed - but they wanted to check that the business had applied the date of the deadline correctly.

We have also seen a variety of arguments put forward both by businesses and consumers (and their representatives) about how our jurisdiction operates in this area. Our task is to apply the time limits set down by the FSA - taking into account the individual facts of each case. If we are unable to deal with a case, we explain the reasons for this to both sides.

In some cases, we have seen an increase in the complexity of the calculations needed to work out the redress that should be paid. Our starting point for assessing compensation is the guidance set out in the FSA's rules. However, calculating redress can be more complicated where consumers have already taken a range of different actions - such as redeeming their mortgage in full or switching to a repayment mortgage - before bringing their complaint to us. Where we uphold a complaint, the overriding principle remains that we look to put the consumer back into the position that they would have been in if the policy had not been mis-sold.

complaints about whole-of-life policies and savings endowments

year ended 31 March number of complaints
2008 3,211
2007 3,734
2006 4,163
2005 4,506
2004 5,442
2003 5,009

Whole-of-life policies are often sold to meet potential inheritance tax liabilities. However, during the year we have continued to receive complaints from consumers who are unhappy that policies taken out for this purpose have not met their expectations.

A regular feature of these complaints is the so-called "premium review" clause. In the cases we see, consumers complain that these built-in reviews of the premiums they need to pay have led either to an unaffordable increase in the premium - or to a reduction in the promised pay-out, to the extent that it will no longer meet the potential tax liability.

The "premium review" clause in the policies we see has not always been obvious from the product literature. Details of how the clause operates - and how the premium is calculated as a result of the review - have often been opaque. And we also frequently see complaints where the clause had not been brought to the consumer's attention - or where its operation remained insufficiently understood, even after advice had been given. Calculating the new premium following a "premium review" is a complex actuarial matter and, in many of the cases we see, the business involved has failed to explain the new premium fully - if at all - to the consumer.

Consumers who understood that a review would be carried out often complain to us that they were, nevertheless, still alarmed to find they were faced with a sudden large increase in premiums - when they had thought the purpose of a regular review was to stop this from happening.

Given the cost of the life insurance included as part of the policies, the potential unsuitability of endowments as savings vehicles has been the subject of action by the regulator. But complaints we see suggest that some firms still fail to appreciate that this might not be the sole reason for an endowment's unsuitability when sold primarily as a savings vehicle.

Frequently, in complaints we see, it is the other charges built into the policy that make it unlikely that the product would achieve the returns the consumer had been led to expect - other than in years of exceptional performance. It does not seem unreasonable for a consumer to expect a savings policy to, at the very least, return the amount invested.

Consumers who complain to us about these policies generally say they had expected a higher return than they would have received from a deposit account. We are likely to uphold these complaints in favour of the consumer, where we decide they were not adequately informed that lower returns were possible.

complaints about personal pensions

year ended 31 March number of complaints
2008 5,297
2007 3,687
2006 4,053
2005 4,214
2004 5,303
2003 7,233

The upward trend during the year in the number of complaints we received about personal pensions resulted largely from the doubling in cases about advice to transfer out of SERPS (the State Earnings-Related Pension Scheme). SERPS was the additional state pension-scheme that was superseded by the State Second Pension (S2P) from April 2002.

A significant proportion of these SERPS complaints were submitted to us in bulk by claims-management companies - using standard forms and template letters. Many of these cases had no reasonable chance of success, given the individual circumstances involved. The claims-management companies often appeared to have given consumers unrealistic expectations of very large sums of compensation in cash - without having considered the actual merits of the individual cases.

In last year's annual review we noted that the pensions simplification changes that had come into effect in April 2006 had not resulted in significant numbers of new complaints. This year we have started to see a couple of new areas where the changes have led to disputes being referred to us.

One area involves so-called "triviality" - where pension funds can be taken as a lump sum if the total value of the funds involves less than 1% (currently £15,000) of the total lifetime allowance for pensions savings. From a number of complaints we have seen, it appears that some advisers have failed to understand how these provisions work in practice.

We have also received complaints from consumers who, before the pensions simplification changes came into force, took out self-invested personal pensions (SIPPs) for the purpose of investing in residential property. They complained that they had been advised to do this on the understanding that this would be allowed as part of the pensions simplification changes. In the event, this was not the case.

In general, complaints we deal with about pensions continue broadly to turn on the suitability of the pension and/or investment funds involved, and on administrative matters such as delay. SIPPs complaints, for instance, frequently involve disputes about delays in transferring from one provider to another, delays in making income payments, and delays in buying and selling assets (or failing to do so). We regularly refer complaints such as these to the Pensions Ombudsman under a memorandum of understanding between our two organisations.

complaints about investment bonds
(and "packaged" investment products)

year ended 31 March number of complaints
2008 2,750
2007 3,644
2006 5,810
2005 8,213
2004 10,627
2003 6,917

During the year we have continued to receive complaints about so-called "market value reductions" (MVRs) being applied to some with-profits bonds when consumers cash them in. As we have explained in previous annual reviews, we deal with these complaints on the basis of the facts and circumstances of each individual case.

We have also received a significant number of complaints about the failure of bonuses on with-profits bonds to reflect improved stockmarket conditions - and about the way with-profits bonds work, which some consumers believe is inherently unfair.

These more general issues are not a matter for the ombudsman. The management of a fund is an issue for the regulator. So we continue to refer to the FSA - under the "wider implications" process - complaints about "management actions", in relation to with-profits funds that are both open and closed to new business. There is more information about this process on the website that we run jointly with the regulators.

If the FSA has no objection to the way a particular fund is managed, then we tell the consumer who has complained to us that there is nothing further we can do to help. We appreciate that some consumers find this frustrating - but we explain that the FSA, as the regulator, has to take into consideration the interests of all the policyholders as a group.

Another current issue relating to with-profits funds is the way in which some insurance companies are dealing with the inherited estates of with-profits funds (often described as "orphan assets"). These are the surplus assets in a with-profits fund, built up over many years. Issues relating to inherited estates are, again, a matter for the FSA as regulator - and ultimately for the court, which will approve any arrangements in relation to the distribution of these estates.

complaints about stockbroking and portfolio & fund management

year ended 31 March number of complaints
2008 1,209
2007 1,052
2006 975
2005 1,056
2004 1,353
2003 1,547

Clients of stockbrokers need to be certain what they are asking their broker to do for them. During the year we have continued to see complaints where the consumer had been expecting their broker to actively manage their portfolio - only to discover that its value had dropped and that nothing appeared to have been done to halt the decline.

In complaints like this, we start off by looking at the terms and conditions that the consumer has agreed, to identify the extent of the firm's legal obligations. We then look at any other evidence - for example, what was said at the time the investment was made. The firm is not liable for actively managing a portfolio unless it has agreed to do this - or unless the consumer has reasonably been given to understand that it will do so.

Other complaints we have received during the year concern high-risk activities such as spread-betting. In these cases, we look at the particular circumstances of each individual complaint to weigh up whether, on balance, we feel the consumer understood and accepted the risk they were taking. Although it is not yet a regulatory requirement, many brokers already record phone conversations, which can provide us with some very useful evidence in considering complaints like these.

insurance complaints

payment protection insurance (PPI) 39
motor insurance 22
buildings insurance 10
travel insurance 6
contents insurance 5
income protection 3
critical illness insurance 2.5
extended warranty 2.5
legal expenses insurance 2
commercial insurance 1.5
private medical insurance 1.5
pet insurance 1
other 4

payment protection insurance (PPI)

year ended 31 March number of complaints
2008 10,652
2007 1,832
2006 1,315
2005 833
2004 802
2003 803

The number of payment protection complaints referred to the ombudsman service built up gradually throughout the year - with very significant volumes of cases arriving only in the last months of the financial year. In fact, we received more complaints in the first three months of 2008 than in the whole of 2007. This resulted in an overall six-fold annual increase in the total number of disputes about payment protection policies.

From the second half of 2006 we started seeing a distinct change in the type of complaints we were receiving. An increasing proportion of disputes focused on how payment protection policies had been sold - and how they operated - rather than on insurance claims that had been rejected, which had been the cause of nearly all complaints about payment protection up until then. Concern about the selling of payment protection has attracted the attention of the media, consumer groups, the FSA, the OFT and the Competition Commission - driving the upsurge in complaints to the ombudsman service.

In considering complaints about payment protection insurance, we continue to apply our long-standing approach to the sale of insurance products - and the complaints we have seen have raised very few new issues. Applying the standards set by the law, by good industry practice since the 1990s, and in recent times by the FSA, enabled us to be clear about the approach that we take to selling insurance - and to follow this approach consistently in these cases.

We have seen fewer payment protection complaints brought by claims-management companies on behalf of consumers than some had expected. 14% of cases referred to the ombudsman service by claims-management companies involved payment protection insurance - fewer than half the number of cases that claims-management companies brought in relation to mortgage endowments.

On the other hand, we have noticed that an increasing number of consumers have actively pursued their own complaint - first with the business involved, and then with us - using standard letters and templates from newspapers and "reclaim" websites.

In dealing with the large number of disputes involving payment protection insurance, we have identified a number of general patterns and themes in the concerns raised by consumers. We have seen a significant number of complaints from consumers who say they did not ask for a payment protection policy or did not know they had one. Other consumers complain that they were told they had to take out payment protection insurance, even though they did not want it.

We have also seen many cases where consumers complain that when they took out payment protection insurance, they were not aware of relevant important features - such as exclusions which would have made them ineligible for cover.

However, we have seen significant differences in the number of cases received - and the outcome of those cases - depending on the type of payment protection policy involved. In the cases we see, for example, single-premium policies sold by a lender at the same time as the loan appear to present considerably more problems than monthly mortgage protection policies.

Particular challenges include cases where consumers' complaints are made on the basis of standard templates - where individual details may be missing - and where firms have no records of individual sales. These are the types of issues that we take forward - as part of our ongoing dialogue - with the FSA, insurers, intermediaries and consumer groups.

motor insurance complaints

year ended 31 March number of complaints
2008 6,009
2007 4,230
2006 3,372
2005 2,571
2004 2,727
2003 2,372

Motor insurance complaints increased significantly in the year, rising by 42%. They have more than doubled in the last three years - and the proportion of these cases where we support policyholders in their disputes with insurers and intermediaries has increased to around a half. There has been a significant rise in all types of motor insurance complaints referred to us - and we have been in discussion with the motor insurance sector to try to identify possible causes.

We are still seeing a significant volume of disputes about the quality and timing of vehicle repairs, where the insurer has accepted responsibility for carrying out the repair work. We also see many disputes relating to the valuation of cars that have been written-off after a road accident - and we remain concerned that some insurers are not making offers to consumers on a timely or reasonable basis.

We recognise that the number of disputes between insurance companies and policyholders remains exceedingly low, as a proportion of all motor insurance claims. However, as insurers and intermediaries focus on increasing their efficiency in dealing with "high-volume" claims - each of which individually can have a significant impact on the particular consumer involved - it seems likely that there will be a permanent, and growing, demand for our services in relation to disputes in this area.

complaints about buildings and contents insurance

type of complaint 2004/05 2005/06 2006/07 2007/08
buildings insurance 1,624 1,951 1,951 2,669
contents insurance 1,145 1,224 1,238 1,363

During the year we saw a sharp rise in disputes involving buildings insurance (up 37%) and a 10% rise in complaints relating to contents insurance.

The complaints about buildings insurance mostly centred on damage caused by storm, subsidence and flooding. Many disputes related to consumers' concerns about delays by insurers - and dissatisfaction with the way in which repairs were carried out under buildings insurance policies.

Insurers can meet claims under buildings insurance policies, either by offering to pay policyholders a sum of money to allow them to pay for repairs and remedial work themselves - or by arranging for the necessary work to be done and paying for it directly.

When this latter arrangement works well, it can clearly benefit both sides. The policyholder can see that the insurer has taken on the responsibility of selecting and managing builders, plumbers, roofers etc - including ensuring that they do a good job, or chasing them up to demand that they do so. In return, the insurer gets to keep control of costs - and can retain the benefit of any reductions or discounts they are able to negotiate.

When this arrangement goes wrong, however, the insurer and the policyholder can end up locked in a dispute about the failure and delays of those who were appointed to carry out the repairs.

We kept a close eye on the consequences of the severe flooding that hit parts of the country during the summer of 2007 - to pick up on any early indications of problems that might result in insurance disputes being referred to us. Our experience in the past has been that the insurance sector's swift and professional response to large-scale emergencies has been complemented by a realistic and resilient attitude on the part of consumers. So far, the number of complaints that we have seen resulting from the floods has been very low - although we are aware that many people are still unable to return home while waiting for properties to be repaired.

travel insurance complaints

year ended 31 March number of complaints
2008 1,628
2007 1,670
2006 1,787
2005 1,525
2004 1,453
2003 1,088

The number of travel insurance complaints referred to the ombudsman service has declined for the second year running. This is clearly welcome news. We hope it reflects both improved claims- and complaints-handling by insurers, and also growing consumer understanding as to what is - and isn't - likely to be covered by travel insurance.

The largest cause of complaints we see about travel insurance relates to unpaid claims for the cancellation of holidays - rather than disputed claims for medical treatment abroad or theft. However, as many of these claims arise out of the ill-health of someone who was planning to travel - or a relative of someone who was planning to travel - we are still concerned about the lack of clarity in some policy documents we see relating to restrictions regarding medical history and changes in health.

In December 2007 the government announced that from 2009 the sale of travel insurance as part of a package holiday will be regulated by law for the first time. From this date, complaints about the sale of travel insurance by travel agents, tour operators, airlines and others will also be covered by the ombudsman service. We will be working closely with the travel insurance sector and consumer groups in the run-up to 2009 in preparation for this extension of our remit.

health insurance complaints

year ended 31 March number of complaints
2008 1,839
2007 1,959
2006 2,291
2005 2,034
2004 1,748
2003 1,586

In previous annual reviews we have commented on the difficult and sensitive nature of the disputes we deal with involving health and medical insurance. So it is pleasing that - for the second year running - disputes referred to us about all types of policies in this area have declined. We now find insurers have handled complaints fairly in two-thirds of these cases.

Considerable credit for this decline in complaint numbers must go to those insurers and re-insurers who have improved the quality of their claims handling, co-operated in publishing data on how claims are treated, and engaged in discussions on how to improve industry practice.

We were particularly pleased to see the guidance on non-disclosure in protection policies published by the Association of British Insurers (ABI) in January 2008. This guidance endorses the approach to non-disclosure of medical matters that the ombudsman service has developed over time - and that has been followed to a large extent by the Law Commission in their proposals for reforming insurance law.

Difficult aspects do, however, remain in this area of our dispute-resolution work. During the year, for example, we spent a significant part of our time on disputes about the seriousness of illnesses and conditions which may be psychological in origin (at least in part) or which cannot be accurately assessed solely by tests or scans.

Disputes about health insurance generally turn on highly complex issues that, by definition, are of immense personal importance to the consumer and financial significance to the insurer. This probably explains why a higher proportion of health and medical disputes require a binding ombudsman decision to resolve them than in other areas of insurance work, which we can frequently settle disputes more quickly and informally.

For many people, it is clearly a challenge at the best of times for many people to raise a concern about a complex insurance matter - so pursuing a formal complaint must seem all the more daunting following sickness, incapacity or bereavement. This reinforces the need for us to be accessible to consumers from all backgrounds.

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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.