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annual review 2008/09

1 April 2008 to 31 March 2009

what the complaints were about

new cases by area of complaint

type of complaint 2009 2008 2007 2006
mortgage endowments *mortgage endowment complaints are now included with investments and pensions 11%
(13,778 cases)
(46,134 cases)
(69,149 cases)
investments and pensions 17.5%
(22,265 cases*)
(12,787 cases)
(12,429 cases)
(15,795 cases)
banking and credit 43%
(55,038 cases)
(69,238 cases)
(20,099 cases)
(13,709 cases)
insurance 39.5%
(50,168 cases)
(27,286 cases)
(15,730 cases)
(14,270 cases)
new cases in total 127,471 123,089 94,392 112,923

year ended 31 March

what issues the new cases involved

investments and pensions: 17.5%

of which

  • complaints about sales and advice: 72%
  • complaints about administration: 20%
  • other complaints: 8%

banking and credit: 43%

of which

  • complaints about charges: 41%
  • complaints about administration: 35%
  • complaints about transactions: 9%
  • complaints about sales and advice: 7%
  • complaints where financial hardship is the central issue: 4%
  • other complaints: 4%

insurance: 39.5%

of which

  • complaints about sales and advice: 51%
  • complaints about claims: 40%
  • administration: 9%

what financial products the new cases involved

financial products %
payment-protection insurance (PPI) 24
credit cards 14.5
current accounts 11
mortgages 6
motor insurance 5
mortgage endowments 4.5
savings accounts 4
pensions 4
unsecured loans 3.5
buildings insurance 3
whole-of-life policies and savings endowments 3
consumer-credit products and services
(eg hire purchase, debt collecting and store cards)
"with-profits" and unit-linked bonds 2
travel insurance 1.5
stockbroking and portfolio management 1.5
contents insurance 1
income protection and critical illness insurance 1
investment ISAs 1
other products 7


new cases by financial product or service

new cases by financial product or service year ended 31 March 2009 year ended 31 March 2008
payment-protection insurance (PPI) 31,066 10,652
credit cards 18,590 14,123
current accounts
including complaints about
13,682 39,263
  • charges
2,736 31,618
  • direct debits and standing orders
725 562
mortgages 7,602 6,824
motor insurance 6,267 6,009
mortgage endowments 5,798 13,778
other investment-linked products
including complaints about
5,798 2,750
  • "with-profits" and unit-linked bonds
2,959 1,192
  • investment ISAs
1,221 729
  • guaranteed-income bonds
610 296
  • PEPs
211 162
  • "structured" products
203 49
  • unit trusts
191 114
savings accounts 5,183 2,675
including complaints about
4,825 5,297
  • personal pension plans
2,173 2,211
  • SERPs
1,468 2,183
  • annuities
611 383
  • small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs)
373 299
  • income draw-down
130 88
unsecured loans 4,242 2,940
whole-of-life policies and savings endowments 3,515 3,211
buildings insurance 3,447 2,669
consumer-credit products and services
in relation to activities covered since April 2007 by our consumer credit jurisdiction - including complaints about
3,014 849
  • "point-of-sale" loans
770 167
  • hire purchase
762 212
  • debt collecting
407 179
  • store cards
372 110
  • catalogue shopping
316 40
other banking services
including complaints about
2,725 2,643
  • cash machines
821 883
  • cheque clearing
676 612
  • money transfer
516 415
  • electronic payment
514 502
  • safe custody
69 52
other types of general insurance
including complaints about
2,428 1,710
  • commercial policies
493 368
  • pet insurance
392 329
  • roadside assistance
179 218
  • caravan insurance
82 64
travel insurance 1,973 1,628
contents insurance 1,671 1,363
stockbroking 1,208 776
portfolio management 870 433
income protection insurance 774 832
extended warranty insurance 754 701
critical illness insurance 586 638
private medical insurance 514 369
legal expenses insurance 489 474
personal accident insurance 199 238
including complaints about
136 73
  • spread-betting
109 58
free-standing additional voluntary contribution (FSAVC) schemes 115 171
total number of new cases 127,471 123,089

what the complaints were about: banking and credit

Complaints relating to banking and credit made up 43% of the total number of new cases that we received during the year. This table shows how these banking and credit complaints were spread across different products and services.

type of complaint %
credit cards 34
current accounts 25
mortgages 14
savings accounts 9
unsecured loans 7.5
consumer credit
(eg hire purchase, debt collecting and store cards)
other banking services 5

credit card complaints

year ended 31 March number of complaints
2008/09 18,590
2007/08 14,123
2006/07 2,731
2005/06 2,124
2004/05 1,599
2003/04 1,444

The further substantial increase in the number of disputes involving credit cards reflects the fact that we have continued to receive a steady stream of complaints about so-called "default charges" - applied by credit-card companies where a customer pays late or misses a payment, and sometimes where a customer exceeds the credit limit on the card.

No credit-card company has so far chosen to request a formal ombudsman decision on the merits of these cases. Instead, the companies have all preferred to settle the complaints informally by meeting their customers' claims.

In last year's annual review we mentioned an emerging type of complaint, where credit-card companies made substantial increases - sometimes by as much as ten percentage points - in the rate of interest charged on certain customers' credit-card accounts. The companies said that this reflected a move to "risk-based pricing". We have continued to receive complaints of this type this year, and it seemed to us that the issue was one that had wider significance both for consumers and for credit-card companies.

We therefore raised the matter under the formal "wider-implications" procedure that we share with the Office of Fair Trading (OFT - the body that regulates consumer credit) and the Financial Services Authority (FSA). Having considered the matter, the OFT decided that it would not at this time pursue a regulatory solution to the issue. This meant we were able to continue our own investigations into the individual complaints that consumers had referred to us about rate changes already made. Separately, the government agreed a set of principles with credit-card companies about future rate changes. These principles took effect from 1 January 2009.

As part of our investigation into these complaints, we issued questionnaires to the credit-card companies involved, to obtain information about - among other things - the actual assessments of risk that had been carried out in relation to these customers, and how the new rates had been calculated. Almost all the credit-card companies subsequently chose to settle the complaints that had been brought against them, rather than have our investigation continue.

Complaints about disputed credit- and debit-card transactions - made at retail outlets, cash machines or over the internet - continued to form a significant part of our workload during the year. In line with our experience in previous years, most complaints turned on practical issues to do with the particular case in hand, rather than on any complex technical issue.

current account complaints

year ended 31 March number of complaints
2008/09 13,682
2007/08 39,263
2006/07 8,061
2005/06 3,543
2004/05 2,521
2003/04 2,106

The reduction this year in the number of cases involving current accounts reflects the substantial decrease in complaints about charges for unauthorised overdrafts - in the light of the OFT's ongoing legal "test case" and the FSA's decision to provide banks with a continued complaints-handling waiver on these complaints.

The Court of Appeal recently agreed with the High Court's ruling - which in effect means that the OFT could look at the fairness of these charges. However, the legal case continues. And in keeping with the approach still being taken by the county courts, we have confirmed that we will continue to put most of our work on this type of complaint on hold, until the outcome of the legal proceedings is known.

However, consumers who are experiencing financial hardship can continue to bring their complaints to us. Many current-account providers have taken proper steps in these cases to assess their customer's circumstances, and to make fair proposals to ease their financial difficulty. This has helped us to mediate a satisfactory settlement of these complaints.

On the other hand, we have been disappointed to see that some current-account providers have been very slow to engage with customers in such cases - and have needed to be prompted by us before coming up with any meaningful proposals. This is of particular concern, given that these consumers are already in financial hardship.

During the year we have seen more cases relating to "phishing". This fraud involves a consumer responding to an email, ostensibly from their bank, asking for the consumer's security and access details for their online banking facility. In fact, these emails are sent by opportunistic fraudsters who then use the information to gain access to the consumer's bank account. The issues we have to consider in these cases include the circumstances in which the consumer came to respond to the email and the extent of the relevant security warnings that the bank gave its online banking customers.

complaints about mortgages

year ended 31 March number of complaints
2008/09 7,602
2007/08 6,824
2006/07 4,366
2005/06 3,942
2004/05 3,001
2003/04 3,220

During the year we saw an 11% increase in complaints about mortgages. A significant proportion of these cases involved disputes about the handling of mortgage arrears - reflecting the challenging conditions in the property and mortgage markets over the year. We continued to see complaints where the mortgage had already been redeemed following the sale of the property, a re-mortgage or repossession. We prioritise cases where the consumer involved is facing financial hardship - for example, where the lender is repossessing a consumer's home.

During the year we were able to settle many disputes about the handling of mortgage arrears by mediating between the lender and the consumer - leading to a positive and constructive outcome for the consumer.

Guidance published by the FSA during the year also seems to have helped focus the minds of lenders - particularly in the sub-prime sector - and has resulted in lenders reviewing their arrears-handling procedures. The regulatory requirement is that lenders should treat borrowers in arrears fairly. And the implementation of the "pre-action court protocol" in November 2007 was also intended to improve the treatment of borrowers.

Despite these developments we have continued to see cases where mortgage lenders have clearly not treated borrowers in arrears fairly.

Many of the complaints we have seen about mortgage arrears involved disputes about fees charged in connection with arrears. These fees sometimes take the form of a monthly management fee applied to accounts that have reached a certain level of arrears - or they may be charged as other costs, for example, litigation or debt-counselling fees. During the year we settled a significant proportion of cases in favour of the consumer, where we found that fees had been applied incorrectly or had been charged for work that had not been done.

The terms of a mortgage will usually allow a lender to recover additional costs arising from the administration of arrears. But by law these costs should be a reasonable "pre-estimate" of the actual cost to the lender. This is not always easy to determine, where fees are charged as a tariff amount rather than as a direct cost. In settling cases about the level of fees charged, we have considered information provided by lenders about their costs, as well as the way in which the fees have been applied as part of a fair arrears-handling process.

During the year we have dealt with a significant number of less straightforward mortgage-related complaints - generally involving mortgages arranged on a "self-certification of income" basis - where the central issue is the affordability of the mortgage arrangements. The downturn in the property market over the year has meant that it is often now less easy for borrowers to resolve an affordability problem themselves - for example, by selling the property or by re-mortgaging.

In these cases, the consumer's complaint is generally that they were encouraged to inflate their income when applying for a mortgage - or that the broker completed the application for them and included income details that were incorrect.

When considering these cases we look at the actions of the broker and the process under which the mortgage advice was given. We also consider the extent to which the consumer was aware of - and involved in - the mortgage application-process.

Where we uphold these complaints in favour of the consumer, redress is not always straightforward - as we are often unable to return the borrower to the position they would have been in before they were given the advice on their mortgage. In most cases we recommend a lump sum as compensation, based on what we consider to be a fair amount.

The turmoil in the financial markets over the year has involved significant changes to the UK mortgage market. Some lenders have effectively become nationalised and others have withdrawn from the market - for example, where wholesale funding was no longer available to them. This has resulted in a number of consumers coming to the end of their existing preferential mortgage deals - and complaining to us about the unavailability of mortgage funding on similarly competitive terms.

As the Bank of England base rate fell during the year, some lenders said they would not pass on the full benefit of the rate cuts to customers with tracker-mortgages (mortgages where the interest rate charged follows the base rate). However, decisive intervention by the FSA almost certainly prevented a significant number of complaints about this being referred to us.

During the year we saw cases where the consumer was unfairly trapped in a mortgage by a change of lending policy. In the circumstances of these particular cases, we did not consider the lender was acting fairly in seeking to apply contractual clauses that triggered early-repayment charges.

complaints about savings accounts

year ended 31 March number of complaints
2008/09 5,183
2007/08 2,675
2006/07 1,438
2005/06 1,233
2004/05 1,154
2003/04 806

The two-fold increase we have seen in complaints about savings accounts has related primarily to problems with account administration - especially opening and closing accounts. In the first half of the year we saw a significant rise in complaints about administrative delays in relation to cash-ISAs. This is a topic we have covered in our newsletter, ombudsman news, and in previous annual reviews.

During the year we also received complaints involving newer issues - such as the "safety" of savings institutions. Consumers in these cases complained that they found themselves locked into fixed-term savings accounts, which they now regarded as "riskier" than they had been led to believe from the product literature.

The "risk" the consumers complained about related to savings that exceeded the maximum amount protected by the UK Financial Services Compensation Scheme (FSCS) - either because they had made a large initial deposit with a single institution, or because the subsequent merger of savings institutions had the effect of amalgamating their savings above the upper limit of the FSCS.

In these cases, we have not generally upheld complaints that the product literature was misleading in describing the accounts as not involving risk. This is because the product literature we have seen discusses "risk" purely in the context of the risk of loss of capital through investment performance.

As savings institutions compete to attract customers with eye-catching rates, consumers continue to complain to us about unusual or unexpected features of savings accounts. These complaints generally relate to conditions or exceptions in the "small print" - which affect eligibility for the "headline" offer, and which consumers say they found out about only after opening the account.

Unusual or unexpected account-terms must be fairly brought to a customer's attention before they open a new account. If we conclude that this has not happened in a particular case - and the consumer has lost out as a result - we are likely to uphold the complaint in favour of the consumer.

complaints about unsecured loans

year ended 31 March number of complaints
2008/09 4,242
2007/08 2,940
2006/07 1,755
2005/06 1,507
2004/05 1,133
2003/04 1,116

The number of complaints that we received about unsecured loans during the year rose by 44%. A significant proportion of these cases involved consumers having difficulty repaying loans. Clearly, this partly reflects the credit difficulties that began to emerge last summer. In these cases, consumers generally complain to us that their lender has not treated them fairly in relation to their debt.

The outcome of these complaints varies, depending on the individual circumstances. Our approach often involves mediating an informal settlement, which provides a fair and practical outcome for both the consumer and the lender. For many consumers, the loan in question is just one of a range of pressing debts. In such cases we provide the consumer with details of agencies that provide free debt advice, so that they can also get help to deal with their wider financial problems.

We also continue to receive complaints from consumers who are unhappy with the quality of goods they have bought with a loan - and who believe that the lender is liable to them under section 75 of the Consumer Credit Act 1974. Under section 75, the lender is jointly liable with the supplier of the goods or services for any breach of contract or misrepresentation - provided that there is the necessary "borrower-lender-supplier relationship", and subject to certain other conditions.

These complaints often require us to form an opinion about the quality of the goods provided by the supplier. We are normally able to do this with the aid of evidence provided by both sides - often in the form of photographs or estimates - or expert reports that we can commission.

Disappointingly, we still see cases where a lender has responded to a section 75 claim by maintaining that the consumer has first to sue the supplier - before being able to bring a complaint against them as the lender. This is not what the law says. If we find that a consumer has been misled by their lender in this way - and has incurred unnecessary additional costs and inconvenience as a result of what they have been told - we will require the lender to compensate the consumer appropriately.

We have received a number of complaints during the year from consumers who believe their loan agreements may be "unenforceable at law". Because the ombudsman service is not a court, we have no power to declare a loan agreement unenforceable - and so the ombudsman is not the best forum for this kind of complaint.

However, in these cases it often seems to us that the consumer (or in some cases, their advisers) may not have entirely understood the effect of the law on which they are basing their claim. In any case, we do not expect consumers to bring complaints to us as legal pleadings. We decide individual complaints on their particular facts and merits - not on how expertly or persuasively the case is argued.

So while it would be for a court of law to consider the specific issue of the enforceability of a loan agreement, we can deal with general complaint-issues relating to whether a loan was unaffordable from the outset, and whether information provided by the lender was misleading about the cost (or benefit) of taking out the loan.

complaints about consumer credit

year ended 31 March number of complaints
2008/09 3,014
2007/08 849

We are starting to receive a much wider range of complaints relating to consumer credit. The range of credit we cover now extends beyond the loans and credit cards provided by banks and building societies (which have been under our remit since we were first set up) - and includes, for example, credit-related complaints about hire-purchase firms, debt collectors and catalogue-shopping companies, whose customers may now have access to the ombudsman for the first time.

This year saw a more than three-fold increase in the number of consumer-credit complaints compared with the 2007/08 financial year - which was the first year that we covered the wider consumer-credit sector under our "consumer credit jurisdiction".

A significant feature of this wider range of consumer-credit complaints are cases involving "point-of-sale" loans. These are loans provided to the consumer specifically to finance the purchase of particular goods or services. The loan is arranged by (or through) the retailer, and the money from the loan is paid directly by the lender to the retailer.

complaints about other banking services

year ended 31 March number of complaints
2008/09 2,725
2007/08 2,643
2006/07 1,748
2005/06 1,360
2004/05 1,083
2003/04 1,106

The new cheque-clearing arrangements introduced in November 2007 should reassure consumers that it is safe to draw on a UK cheque, if it has not been returned unpaid by "day six" of the clearance-cycle.

However, the complaints we have continued to see in this area suggest that consumers still struggle to understand fully how this cycle actually works. Banks and building societies also sometimes struggle to provide clear explanations when asked. There are more opportunities for misunderstanding between the bank and its customer where the situation involves a cheque drawn in euros or on a foreign bank.

During the year we continued to deal with complaints about international money transfers, carried out both within Europe and worldwide. In our last annual review we highlighted some of the problems in this area - which we continue to see. From November 2009 the ombudsman service will - for the first time - cover complaints about money-transfer operators who are not currently regulated by the FSA or licensed by the OFT. This will be under the European Payment Services Directive.

During the year we have seen a small reduction in the number of complaints about electronic-payment services. These cases relate mainly to the payment services that consumers use to buy and sell goods over the internet. Most of these complaints have been about the clarity and terms of the "buyer protection" and "seller protection" policies of the payment-service providers. We are usually able to settle cases like this informally at the early stage of our dispute-resolution process.

what the complaints were about: investments and pensions

Complaints relating to investments and pensions made up 17.5% of the total number of new cases that we received during the year. This table shows how these investments and pension-related complaints were spread across different products and services.

type of complaint %
mortgage endowments 26
whole-of-life policies and savings endowments 16
"with-profits" and unit-linked bonds 13
pensions 10
SERPs 6.5
stockbroking 5.5
investment ISAs 5.5
portfolio management 4
annuities 3
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs) 1.5
other products 9

While the number of new complaints about the mis-selling of mortgage endowments more than halved during the 2008/09 financial year, the number of new complaints relating to all other types of investments increased by 30%.

complaints about mortgage endowments

year ended 31 March number of complaints
2008/09 5,798
2007/08 13,778
2006/07 46,134
2005/06 69,149
2004/05 69,737
2003/04 51,917

During the year we continued to see declining numbers of complaints about mortgage endowment policies. This is a trend we have seen for some time, as the time-limits set by the FSA for making a complaint expire for an increasing number of consumers.

We received 5,798 new complaints during the year, an average of around 110 new cases each week. This is less than half the number of cases received in the previous year - and less than a tenth of the number we were receiving when mortgage endowment complaints formed up to two thirds of our total workload between 2004 and 2006.

Among the mortgage endowment cases we dealt with during the year, we saw a small rise in the number of complaints about policies that have not been in force for a long time - for example, where they have have been surrendered. These cases can present evidential problems which make it difficult for us to decide fairly the merits of the complaint. And we have sometimes been unable to proceed with cases where neither the consumer nor the business could provide enough information to allow us to make a proper assessment of the complaint.

While the volume of mortgage endowment complaints has reduced significantly, mortgage endowment policies remain the single most-complained about investment product that we see. It is likely that we will continue to receive complaints in this area for some time, although not at the levels we have previously dealt with.

For example, it is possible that recent stock market falls may lead to an increase in mortgage endowment complaints, particularly if consumers have not previously received a "re-projection letter" warning of a shortfall on maturity. We may also see a rise in complaints in the next few years, as the large numbers of endowment policies that were sold with 25-year mortgages in the mid- to late 1980s start to mature.

complaints about whole-of-life policies and savings endowments

year ended 31 March number of complaints
2008/09 3,515
2007/08 3,211
2006/07 3,734
2005/06 4,163
2004/05 4,506
2003/04 5,442

During the 2008/09 financial year the level of new complaints we received about whole-of-life policies and endowment savings-plans rose by just under 10%.

The continuing flow of complaints about increased premiums (or reduced sums-assured) in relation to so-called "reviewable" whole-of-life policies stresses the need for businesses to explain clearly at the outset how these policies work.

Too often in the complaints we see, the fact that the premium can rise dramatically to maintain the sum-assured comes as an unwelcome surprise to the consumer, who may face a considerable increase in premiums at the very time - perhaps following retirement - when it can least be afforded. As these policies are often sold to mitigate potential liabilities to inheritance tax, it is important that the consumer understands at the outset that the premium may well rise in the future.

In the complaints we see, consumers investing in endowment savings-plans generally expect them to perform better than a deposit account. Businesses selling these products often argue that the structure of the plan brings a discipline to regular saving. This may well be true - but the cost of the life-cover and other charges built into these products can mean that a reasonable return is unlikely to be achieved in poor market conditions. In the complaints referred to the ombudsman service this had not always been made clear when the consumer took out the policy.

complaints about investment-linked products

year ended 31 March number of complaints
2008/09 5,798
2007/08 2,750
2006/07 3,644
2005/06 5,810
2004/05 8,213
2003/04 10,627

The stock market volatility that we have seen over the year means that investment-linked products are unlikely to have performed as expected. This has been reflected in the number of complaints referred to us about investments more than doubling over the year.

Under our rules we have the discretion to decide not to deal with (to "dismiss") complaints that are purely about investment performance. But it is evident that poor stock market conditions can also expose poor advice and sales - for example, where consumers who were willing to accept only a low risk to their capital find they have actually invested in a higher-risk product.

In complaints like this we have to look carefully at the circumstance of each sale, to ensure that the product was suitable for the consumer at the time the investment was made. Clearly, it is important that we do not apply hindsight in these cases - and we place much reliance on evidence from the actual point of sale. This means we look at what advice was given to the consumer, and we examine "suitability letters" or reports issued at the time of the sale, to see how clearly any risks were drawn to their attention.

If we decide that warnings were inadequate - and that the product appears to be of a higher risk than the consumer was willing to accept - we may conclude that the sale was unsuitable. On the other hand, if we consider that the risks were clearly set out, and that the consumer was given adequate warning that the investment appeared to be too risky for them, the consumer is likely to have difficulty persuading us that they were misled - if they decided to go ahead anyway.

Over the year we have seen a growing number of complaints about the management of "with-profits" funds - as bonuses have been cut or removed, and "market-value reductions" have been imposed on investments that were cashed-in early. In our experience, consumers fail to understand how products aimed at "smoothing out" the effects of stock market volatility can have suffered so much in bad times - yet benefited them so little when times were good.

The way "with-profits" funds operate is complex - and it is for the FSA, as the regulator, to consider how such funds are managed, taking account of the interests of all policyholders. This is why we usually use the formal "wider-implications" procedure to find out if the regulator has expressed a view - before we decide whether we can pursue such cases.

Similar problems arise with investments in property funds. If a significant number of investors in a property fund want to withdraw their money immediately in a falling market, the forced sale of property owned by the fund would drive down values even more. So to protect investors remaining in their property funds, a number of businesses imposed deferral periods on consumers wanting to withdraw their investments.

The right of a business to do this is usually contained in the fund's terms and conditions - and the timing or extent of a business's actions in this matter are generally questions of legitimate commercial judgement that we do not look at. However, these issues may well impact on the suitability of this type of fund for a particular consumer, especially if the money invested in the fund was likely to have been needed at a specific date. When we look at complaints about property funds, we also consider carefully the extent and clarity of the information made available to the consumer.

The failure of the investment bank, Lehman Brothers, during the year led to a number of complaints being referred to us about so-called "structured" products. Some years ago, we dealt with a significant volume of complaints about "structured capital-at-risk" products - commonly called "precipice bonds". The cases we are now seeing are different from those complaints, in that the capital in these more recent cases appears to have been "guaranteed" to some extent - although the level of investment return depended on certain factors.

However, when the investment bank (Lehman Brothers) backing these bonds failed, investors learned that the capital had not, in fact, been guaranteed in the way they had thought - and in many cases they had no access to the Financial Services Compensation Scheme (FSCS). We have agreed with the FSA that complaints about Lehman-backed "structured" products should be dealt with under the "wider-implications" procedure.

complaints about pensions

year ended 31 March number of complaints
2008/09 4,825
2007/08 5,297
2006/07 3,687
2005/06 4,053
2004/05 4,214
2003/04 5,303

The total number of pensions-related complaints we received during the year declined by 9% - largely as a result of SERPs complaints falling by a third. These complaints involved advice to transfer out of SERPs (the state earnings-related pension scheme, replaced by the state second pension - S2P - from April 2002).

A significant number of SERPs complaints had been submitted in the previous year by a small handful of claims-management companies. Most of those cases had no realistic chance of success, given the circumstances involved and the fact that the claims-management companies had done little work themselves to look at the actual merits of the individual cases. The claims-management companies involved in this area are no longer in operation.

Like these SERPs cases, most of the pension-related complaints we handled during the year continued to turn broadly on the suitability of the pension policy and/or investment funds selected for the particular consumer involved.

The pensions simplification changes that came into effect in April 2006 - mentioned in previous annual reviews - have also now featured more regularly, both in the complaints themselves and in our approach to redress in cases we uphold. Because payments into pension arrangements typically have to be treated as contributions from the member, the ability of the member to make contributions, and the tax treatment of those contributions, directly affect any compensation we may tell a business to pay.

Unsurprisingly, the impact of volatile stock markets on pension-fund investments featured frequently in the complaints we saw during the year. The financial fall-out from the "credit crunch" has affected not only the performance of stocks and shares, and the value of bricks and mortar, but even the security of cash funds in some cases.

This has highlighted issues where consumers and their financial advisers have not sufficiently considered their tolerance to risk. An investor may have been identified as willing to accept a medium degree of risk, in the hope of a medium degree of growth. But in the complaints we have seen this year, advisers have not always considered the consumer's ability, or willingness, to absorb a corresponding decline in values.

Property funds have featured in many pension-related complaints during the year. (We also mention property funds in relation to complaints we have received about investment bonds.) Historically, property funds have offered attractive returns with stability. However, property values go down as well as up - and in the current economic environment it can be difficult to dispose of both residential and commercial property.

As more investors have sought to switch out of property funds during the year, the downward pressure on values has increased, creating a spiral of dissatisfaction among the investors who have brought their complaints to us. Some fund managers have relied on the "deferral" period - typically associated with property funds - to force investors to defer cashing in their investment. Not being able to access their investments when they want to can be worrying for any investor - and the worry is clearly greater where the consumer is wanting the money in order to retire.

complaints about stockbroking and portfolio management

year ended 31 March number of complaints
2008/09 2,078
2007/08 1,209
2006/07 1,052
2005/06 975
2004/05 1,056
2003/04 1,353

The 72% rise in complaints referred to the ombudsman service about stockbroking and portfolio management has almost certainly resulted from the stock market volatility during the year.

The types of case we have seen include, for example, disputes over instructions to sell the stock of institutions that were subject to adverse public comment and speculation. Where these instructions were not executed as requested - or were not executed as promptly as the customer would have liked - there may have been significant loss. In these cases we consider the evidence - often listening to recordings of phone conversations - to decide if the business did anything wrong. We do not uphold complaints on the grounds of disappointing investment performance alone.

During the year the FSA took enforcement action against the stockbroking firm, Pacific Continental Securities. This firm provided advice to retail customers on smaller-capitalised and emerging companies. A significant number of complaints had been referred to us about this firm, which caused the FSA some concern about whether the firm could remain adequately capitalised. In fact, the firm went into administration and complaints were subsequently referred to the Financial Services Compensation Scheme (FSCS). We are still receiving a disproportionate number of stockbroking complaints about the sale of smaller-capitalisation shares - an area clearly susceptible to high-pressure selling.

what the complaints were about: insurance

Complaints relating to insurance made up 39.5% of the total number of new cases that we received during the year. This table shows how these insurance complaints were spread across different types of policy.

type of complaint %
payment protection 62
motor 12.5
buildings 7
travel 4
contents 3.5
income protection 1.5
extended warranty 1.5
critical illness 1
legal expenses 1
commercial 1
private medical 1
other (eg pet and caravan) 4

payment-protection insurance (PPI)

year ended 31 March number of complaints
2008/09 31,066
2007/08 10,652
2006/07 1,832
2005/06 1,315
2004/05 833
2003/04 802

During the year the volume of complaints we received about payment-protection insurance (PPI) tripled - following a five-fold increase in the previous year. The vast majority of these cases continued to involve disputes about the sale of PPI policies - rather than disputes about the rejection of claims made under PPI policies.

The PPI complaints we see mostly concern policies that were paid for with a single premium, where the up-front cost was added to an unsecured or second-charge loan. We also see a significant number of cases relating to payment-protection insurance sold alongside credit cards. However, mortgage payment-protection insurance (MPPI) and other forms of payment protection have not given rise to significant volumes of complaints to the ombudsman service.

Many consumers complain to us that they were pressurised into purchasing these policies. Some say that they did not realise they had, in fact, even agreed to purchase a policy. Or they say that they would not have done so, if they had understood the restrictions contained in the policy. Particular issues occur in the case of single-premium PPI products, where consumers may not have realised that they were borrowing the money up-front to pay for the policy - and that if they cancelled the policy before the end of its planned term, they would get back only a relatively small rebate on the premium they had paid.

Our investigation of these issues can involve listening to phone recordings made at the time of the sale, or considering sales scripts and staff training-material - as well as looking at the documentation available during the sale.

We have worked closely over the year with the FSA, trade associations and major businesses, to ensure that our approach is well understood across the sector. At its simplest, we decide most complaints about the sale of PPI on the basis of whether the seller recommended a policy that they should have known was unsuitable for their customer - or whether they provided the information that the customer needed, to be able to decide whether to buy the policy.

If we decide that the business gave poor advice or insufficient information, we normally consider what the consumer would otherwise have done. In most cases, this means returning all the premiums paid plus interest. There is more information about our approach to these cases on our PPI online-resource. The approach we adopt follows our well-established process for considering the possible mis-selling of products - while recognising the particular features of insurance and insurance law.

The substantial increase in complaints about PPI - and the exceptionally high proportion (89% of cases) where the outcome is changed in favour of the consumer following our intervention - suggests there is still a widespread problem involving businesses rejecting complaints that they know, or should know, we will uphold. This only adds to the inconvenience suffered by consumers. And it gives rise to concern about the treatment of those who, for whatever reason, decide not to "appeal" their complaint to the ombudsman service.

It also seems that few businesses have conducted the kind of "root-cause" analysis into the background to these complaints that they are required to carry out under the FSA's complaints-handling rules.

In July 2008 we therefore raised the general issue of PPI complaints with the regulator, the FSA, under "the formal wider-implications" procedure. We asked the FSA to consider whether - in the light of the evidence available to us, its own regulatory findings, and the findings of the Competition Commission - it should take wider regulatory action. We have worked closely with the FSA as it considers the position.

In February 2009 the FSA announced that it had asked all businesses still selling single-premium PPI with unsecured personal loans to withdraw the product by the end of May 2009. And in April 2009 the FSA announced that it would bring forward guidance on PPI complaints handling in its Handbook.

We have seen a steady increase over the year in the proportion of PPI complaints referred to us by claims-management companies, which now represent consumers in over half of the PPI cases we handle. Many of these cases involve mis-selling claims presented in a standard format, with little information about the specific circumstances in which the individual policies were sold. This can make it difficult both for businesses and for us to get to the bottom of what actually happened in a particular case. To help improve the position, we are talking to claims-management companies and the Ministry of Justice (which is responsible for the regulation of these companies).

During the year the review into how the PPI market-place operates, initiated by the OFT and subsequently taken up by the Competition Commission, has come to a conclusion. This has led to a proposed ban on the sale of single-premium PPI policies, as well as to a series of other measures aimed at giving consumers more choice and more time to understand the PPI policy they may be about to buy.

This should mean that the potential for disputes to arise about future sales of these policies will diminish. However, significant concerns remain about widespread mis-selling of these policies in the past - which may lead to substantial numbers of complaints in the future.

motor insurance complaints

year ended 31 March number of complaints
2008/09 6,267
2007/08 6,009
2006/07 4,230
2005/06 3,372
2004/05 2,571
2003/04 2,727

During the year we continued to receive motor insurance complaints at record levels. Motor insurance disputes are a long-standing and familiar part of the ombudsman's work. Our approach in these cases is well established and widely known across the sector.

The continuing increase in the number of these cases - and the rise in the uphold rate in favour of consumers in recent years - is therefore disappointing.

We are discussing this with individual insurance companies and the main industry trade-body, to see if there are issues that need to be addressed. This work is progressing well and complaint volumes started to decline in the last quarter of the 2008/09 financial year .

We published a technical note on our website during the year, reminding insurers about our approach to disputes about the valuation of cars that have been "written-off". We believe this will help to reduce the significant number of complaints we receive on this topic.

Other major areas of dispute in relation to motor insurance continue to include the quality of the repair service provided after an accident, and a variety of administrative and service issues that the parties have been unable to resolve themselves. Most of the complaints we deal with arise after consumers have made a claim under a motor policy. We see relatively few complaints about the sale of motor policies - which means we continue to deal with only modest numbers of complaints about general-insurance intermediaries and "aggregators" (for example, information-comparison services).

complaints about buildings and contents insurance

year ended 31 March number of complaints
relating to buildings insurance relating to contents insurance
2008/09 3,447 1,671
2007/08 2,669 1,363
2006/07 1,951 1,238
2005/06 1,951 1,224
2004/05 1,624 1,145
2003/04 1,549 1,154

During the year the number of complaints referred to the ombudsman service about buildings and contents insurance rose by 27%. This increase related to all types and areas of household insurance - and probably reflects the recessionary environment, in which consumers and insurers are now clearly taking a tougher line in protecting their financial position. Cost-cutting and redundancies in the insurance sector, together with increased financial uncertainty among consumers, can lead to disputes being fought more tenaciously on both sides.

There has also been speculation about the increased incidence of insurance fraud during a recession. While we remain vigilant in this area, the issue of fraud is relevant in only a very small number of disputes we see. And we continue to have concerns about the extent of the discretion that some insurers give themselves in their policy terms - in the form of provisions which they say they may need to invoke to protect themselves from potential fraudsters.

travel insurance complaints

year ended 31 March number of complaints
2008/09 1,973
2007/08 1,628
2006/07 1,670
2005/06 1,787
2004/05 1,525
2003/04 1,453

The number of travel insurance complaints we received during the year increased by 21% - and the proportion of cases we upheld in favour of consumers (39%) has remained at a similar level to previous years.

From 1 January 2009 travel agents and tour operators selling "connected travel insurance" (travel insurance sold alongside a holiday or other travel) have been regulated by the FSA - and covered by the Financial Ombudsman Service.

We worked closely with the travel sector to ensure that businesses were prepared for this change - and that they understood their complaints-handling responsibilities and the role of the ombudsman.

So far, we have seen very few sales-related complaints. Our experience is that most disputes over travel insurance involve an actual claim, rather than the sale of a policy. However, complaints about a travel claim may raise issues about how the insurance was originally sold by the travel business - and this is an aspect that we are now able to look at.

health and medical insurance complaints

year ended 31 March number of complaints
2008/09 1,874
2007/08 1,839
2006/07 1,959
2005/06 2,291
2004/05 2,034
2003/04 1,748

The number of complaints we received during the year in relation to health and medical insurance remained at a similar level to the previous year. This clearly reflects improvements in the way in which insurers are now dealing with income protection and critical illness disputes, where the consumer's medical history is an issue.

The introduction in January 2008 of the Association of British Insurers' guidance on non-disclosure in claims relating to long-term protection policies (upgraded to the status of a code of practice from January 2009) has had a beneficial effect for policyholders. It has also brought the sector clearly in line with the approach that we have been adopting for some time. This has resulted in fewer cases about the non-disclosure of a consumer's medical history now being referred to us. And in those cases we do see, we are now agreeing more often than before that the insurer acted fairly.

We continue to receive complaints from consumers who have entered into so-called "reviewable" insurance policies, where the insurer has the right to review the premium at intervals of five or ten years. These disputes generally involve reviews that have been carried out after many years - and have resulted in a significant increase in the premium.

In these cases, we consider the evidence to see whether the consumer was made aware, at the time of the sale, of the possibility of the premium being reviewed. We also consider whether the term that permitted the review was fair under the terms of the Unfair Terms in Consumer Contracts Regulations - and if so, whether the review was carried out in accordance with these terms.