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annual review 2008/09

1 April 2008 to 31 March 2009

how we dealt with the complaints

number of cases we resolved

year ended
31 March
cases resolved
2009 113,949
2008 99,699
2007 111,673
2006 119,432
2005 90,908
2004 76,704
2003 56,459

We resolved a total of 113,949 cases in the financial year 2008/09 - a 14% increase on the previous year.

how we resolved the cases

The approach we take to resolving disputes is largely determined by the individual facts of each case - and by the level of formality required to settle matters appropriately.

Our preference is to resolve complaints informally - getting both sides to agree at an early stage to any recommendation or informal settlement that our adjudicators may suggest.

But more complex or sensitive disputes - involving hard-fought arguments and entrenched views - may require detailed investigations and lengthy reviews, including an "appeal" to one of our panel of ombudsmen for a final decision. An ombudsman becomes directly involved in a case in fewer than one in ten complaints.

51% of cases ... resolved by an adjudicator settling the dispute informally - through mediation and recommended settlements.

41% of cases ... resolved by adjudicator issuing an "adjudication" - a more formal document setting out our recommendations as to whether the complaint should be upheld.

8% of cases ... resolved by an ombudsman carrying out a review and making a final decision - where the earlier informal intervention by an adjudicator hasn't settled the dispute. A decision by any of our panel of 41 ombudsmen is final - it is the last stage of our dispute-resolution process.

As part of our consideration of complaints, our rules allow us to hold hearings - face-to-face meetings - held either in public or in private. We can also hold hearings over the phone - which is useful where it might be difficult to arrange a location convenient for all parties. Hearings are generally as informal as possible - and held only in cases where the documentary evidence is very finely balanced and the facts of the case are at issue.

We do not hold hearings automatically on request, and if we are asked for a hearing by either a consumer or a business, we consider carefully what value it will add. We do not believe that hearings should be held simply to allow either side to confront the other in person. During the year we held fewer than 20 hearings in cases where the ombudsman involved considered that it would help them get to the bottom of a case.

how we record the outcome of cases

We record the outcome of a consumer's complaint as "changed" - meaning we upheld the complaint - in cases where:

  • The financial business told the consumer in its final response that it had done nothing wrong - but after the complaint was referred to us, we decided (or the business belatedly accepted) that it had done something wrong after all.
  • The financial business's final response offered the consumer inadequate compensation - but after the complaint was referred to us, we required the business (or it belatedly agreed) to increase its offer to an appropriate level.

We record the outcome of a complaint as "not changed" - meaning we did not uphold the consumer's complaint - in cases where:

  • The financial business had done nothing wrong.
  • The financial business had done something wrong, but had already offered the consumer appropriate redress (before the complaint was referred to us).

outcome of cases

In the financial year 2008/09 we upheld 57% of the complaints we dealt with. This means that in almost six out of ten cases, the outcome of a consumer's complaint following investigation by a financial business was changed in favour of the consumer as a result of our subsequent involvement. This uphold rate is higher than in any previous year.

banking and credit complaints

banking and credit complaints % of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint")
year ended 31 March 2009
% of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint") *
year ended 31 March 2008
credit cards 76% 86%
current accounts 61% 88%
mortgages 40% 38%
savings accounts 64% 40%
unsecured loans 49% 44%
other banking services 55% 48%

investment complaints

investment complaints % of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint")
year ended 31 March 2009
% of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint") *
year ended 31 March 2008
mortgage endowments 37% 32%
whole-of-life policies and savings endowments 34% 40%
investment bonds 42% 38%
pensions 23% 18%
stockbroking and portfolio management 42% 41%

insurance complaints

insurance complaints % of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint")
year ended 31 March 2009
% of complaints where the outcome changed
as a result of our involvement
("we upheld the complaint") *
year ended 31 March 2008
payment-protection insurance (PPI) 89% 47%
motor insurance 50% 51%
buildings insurance 44% 41%
contents insurance 41% 37%
travel insurance 39% 38%
health insurance 31% 33%

* These numbers combine the two categories, "we agreed with the consumer's complaint" and "mixed outcome", that we showed in the annual review for 2007/08. The chart excludes complaints that were withdrawn or were outside our remit.

From the autumn of 2009, we will also be publishing information on the outcome of complaints referred to us about individual named businesses. Following public consultation, we will be making available on our website the number of new complaints - and the proportion of complaints we uphold in favour of consumers - in relation to businesses that have 30 or more new and closed cases in each six-monthly period.

putting things right

Where we uphold a complaint in favour of a consumer, there are a number of ways in which we can put matters right - depending on the individual circumstances of the case. These include:

  • Telling the business to pay redress - to put the consumer in the position they would now be in, if the business hadn't got it wrong in the first place.
  • Telling the business to compensate the consumer for particular distress or inconvenience. We did this in around a quarter of the complaints we upheld during the year - generally awarding an amount between £150 and £500.
  • Directing the business to take action, to put right what's gone wrong. This can range from correcting credit references to paying a previously-rejected insurance claim.
  • Telling the business to apologise.

Where we do not uphold a complaint in favour of a consumer, our aim is to give a clear explanation - from an entirely impartial standpoint - as to why we believe the financial business has done nothing wrong (or has already offered the consumer appropriate redress).

In many cases it was poor communication between a financial business and its customer that led to a simple misunderstanding escalating to the stage where the ombudsman service had to get involved.

Consumers can sometimes pursue grievances in an unfocused and unbalanced manner that may make them appear unreasonable to the business they complain to. On the other hand, businesses sometimes respond to customer concerns unhelpfully and defensively - aggravating problems that a clear and careful explanation might easily have resolved.

A consumer's failure to present a coherent and reasoned argument does not automatically mean that a case has no merit - or that the complaint should be considered "frivolous and vexatious". Of the 113,949 complaints we settled during the 2008/09 financial year, we concluded that only 98 cases (less than 0.1% of the total) could reasonably be categorised in that way.

time taken to resolve cases

The table below shows the time it takes to settle disputes that are referred to the ombudsman service.

The greater-than-forecast number of complaints we received during the year (127,471 actual cases rather than the forecast 90,000) meant that our expectations of improving the average time to resolve and close a case were not fulfilled. We resolved around a third of disputes within three months (compared with 42% in the previous year), upholding over 70% of these cases in favour of the consumer. And we resolved just under eight out of ten disputes in nine months.

year ended 31 March resolved within 3 months resolved within 6 months resolved within 9 months resolved within 12 months
2009 30% 56% 77% 88%
2008 42% 70% 81% 86%
2007 34% 61% 76% 85%
2006 32% 59% 75% 85%

We want to be able to settle cases as quickly as possible - and our aim for 2009/10 is to resolve 45% of disputes within three months and 65% within six months. To help us achieve this, we have recruited 175 additional adjudicators during the year, together with a number of teams of contract and outsourced staff, to provide the flexibility to cope with the volatility in complaint volumes.

We also continue to put resource into our "early assessment" teams of adjudicators - who focus on new cases where there are opportunities to intervene early on and encourage informal settlement.

We prioritise cases where, for example through financial hardship or for medical reasons, consumers might be disadvantaged by having to wait longer. During the year we expanded the information on our website, explaining how we allocate and prioritise cases.

The complaints we deal with can change suddenly and unexpectedly - both in terms of their numbers and their subject matter. And receiving unexpected volumes of complaints - as has happened this year - can sometimes mean it takes longer than we would like to allocate new cases to an adjudicator or ombudsman.

Many cases can be resolved quickly, once we have allocated them to an adjudicator. But complex cases can take longer. During the year we have noted an increase in the number of disputes involving hard-fought arguments and entrenched attitudes on both sides - as businesses increasingly take a legalistic approach to dispute resolution and consumers become more demanding and less willing to concede.

quality and consistency

We are committed to monitoring the quality and consistency of our work. In response to the substantial increase in the volume of new cases we are now dealing with, our quality committee - a sub-committee of our board of "public interest" non-executive directors - reviewed our quality-assurance arrangements during this year.

This led to our implementing a range of initiatives to enhance our existing quality-assurance framework, reflecting our heavier workload. These initiatives included:

  • Commissioning a comprehensive expert assessment of our quality-checking procedures.
  • Re-assessing the core definition of "quality", around which our quality-assurance work is built.
  • Expanding our quality team by recruiting additional experienced adjudicators - to carry out increased quality-checking across all areas of casework.
  • Introducing a range of operational process-changes to underpin the efficiency and consistency of our checking procedures.
  • Refining the production of performance data and management information.
  • Strengthening internal mechanisms to ensure prompt and effective communication between our quality-checkers and our adjudicators.

Quality is where a case is well-handled, the outcome is reached fairly and reasonably, and communication is clear and prompt.

Work in this area is co-ordinated by our quality team, which reports directly to our recently-appointed director of business-planning and assurance. This team also provides support for our process-improvement and project-management work, and produces and verifies management information and performance data for operational and strategic purposes.

learning and development

The knowledge, experience and expertise of all our staff is central to ensuring high quality and consistency in our work. This is why the training and development of our staff remains a high priority - reflected in our focus on continuing professional development and training at all levels.

Over the year our staff spent a total of 14,250 hours in training activities - an average of three and a half days of training for each employee. This ranged from tailored induction-courses for new starters to refresher training and technical updates for experienced adjudicators. As part of our commitment to the continuing professional development of our case-handling staff, we are developing a formally accredited training-programme involving ongoing testing and assessment.

knowledge and information

Sharing knowledge is an essential part of learning and improving. We share up-to-date casework news and information across the organisation by using our intranet-based knowledge-management "toolkit". Running regular in-house clinics, briefings and seminars also helps ensure the consistency and accuracy of our approach in handling individual cases.

We are also committed to sharing our knowledge with the outside world. Making information increasingly available about our approach to particular types of cases should make it easier for consumers and financial businesses to resolve more complaints themselves - without referring them to the ombudsman service.

To help us do this we have created a new senior post of head of practice. This post - filled in March 2009 at the level of lead ombudsman - has responsibility for co-ordinating, consolidating and documenting information and guidance on casework-policy issues and on the ombudsman's approach.

Our commitment to continuous improvement is supported by our programme of stakeholder and market research - which helps give us a closer understanding of what our customers want, how they rate the service we provide, and where we could do things better. Results and feedback from these stakeholder-research activities are shown in more detail in who complained to us and who the complaints were about.

our service-review team

We know that - like all organisations - we can and do get things wrong. We believe that an important test by which we should be judged is the way in which we recognise, deal with and learn from any shortcomings. This is why - just like the businesses whose complaints we handle - we have our own formal complaints procedure for people who are unhappy with the level of service we have provided.

These complaints are handled by a specialist team of complaints handlers - our service-review team - reporting directly to our director of business-planning and assurance. In the 2008/09 financial year, this team handled 1,307 complaints about our service - 1% of our total workload (compared to 0.7% in the previous year). Around one in ten of these complaints were made by businesses and the others were all from consumers.

The service-review team upheld a quarter of the complaints they reviewed during the year. They paid compensation in 69 cases in recognition of the inconvenience caused by delays or administrative errors on our part. The average payment was under £200.

Where our service-review team is unable to resolve a complaint about our service, it can be referred to the independent assessor - for a formal review of the level of service we have provided. The independent assessor's annual report is published in full as part of this annual review. As the chairman has noted in his foreword, all the independent assessor's recommendations in individual cases have been accepted - as have his helpful suggestions more generally on the way we provide our service.

our budget and productivity

The Financial Ombudsman Service is funded by an annual levy paid by the businesses we cover - and by case fees that we charge businesses for settling disputes referred to us about them.

However, in the 2008/09 financial year we did not charge businesses case-fees for the first three disputes involving them that we settled during the year. Businesses were charged case fees only for the fourth (and any subsequent) dispute during the year. There is more information about how many businesses paid case fees later in this annual review.

Our budget is calculated on the basis of workload forecasts that we consult on publicly each year. Following feedback in January and February 2008 on our proposed budget and workload for the 2008/09 financial year, we increased by 18,000 our forecast for the number of new complaints we could expect to receive - taking the estimated total number of new cases up to 90,000. We also increased by an additional 26,000 the number of cases we estimated we would resolve and close during the year - bringing that total to 110,000.

Taking these increased numbers into account, the boards of the FSA and the Financial Ombudsman Service approved a budget for the ombudsman service - for the 2008/09 financial year - that assumed income of £62.7 million, expenditure of £60 million, and a unit cost of £543.

The actual final figures for the year showed total income of £65.8 million, expenditure of £58 million, and a unit cost of £508. Income from case fees was £2.8 million higher than the budgeted figure - reflecting the fact that we resolved 4% more cases during the year than we had forecast in the budget.

Our productivity - which we define as the average number of cases resolved weekly by each adjudicator - increased by 20% during the year. This was despite the fact that we recruited and trained 175 additional adjudicators - who in many cases became fully productive only towards the end of the year.

In addition to recruiting new adjudicators on a permanent basis, we put in place a number of teams of contract and outsourced staff to help tackle sudden surges in complaints - giving us further flexibility to meet both long-term and short-term demand.

our income and expenditure

our income and expenditure (summary) actual
year ended 31 March 2009
year ended 31 March 2009
year ended 31 March 2008
year ended 31 March 2007
annual levy 19.3 19.0 19.6 16.6
case fees 46.1 43.3 35.5 36.1
other income 0.4 0.4 0.4 0.4
total income 65.8 62.7 55.5 53.1
staff-related costs 47.8 48.2 41.2 42.5
other costs 8.7 9.2 10.0 9.7
financing charges 0.1 0.4 0.2 0.3
depreciation 1.4 2.2 1.7 2.5
total expenditure 58.0 60.0 53.1 55.0
exceptional costs 0.0 0.0 2.9 0.0
surplus/(deficit) 7.8 2.7 (0.5) (1.7)

These figures are drawn from our unaudited management accounts. The directors' reports and audited financial statements are available online and as hard-copy.

average number of cases resolved weekly by each adjudicator

year ended
31 March
average number resolved
2009 4.8
2008 4.0
2007 4.1
2006 4.5
2005 4.4
2004 4.9
2003 4.9

our unit cost

year ended
31 March
our unit cost (£)
2009 508
2008 529
2007 484
2006 433
2005 496
2004 473
2003 518

Our unit cost is calculated by dividing our total costs (before financing charges and any bad debt charge) by the number of cases we complete.

The amount of bad debts during the year was £0.3 million - resulting from firms we cover going out of business, leaving case fees unpaid with no realistic chance of recovery. Over 90% of these costs related to firms that have either been liquidated or placed "in default" by the Financial Services Compensation Scheme (FSCS).