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annual review 2009/2010

1 April 2009 to 31 March 2010

what the complaints were about

new cases by area of complaint

type of complaint 2010 2009 2008 2007
banking and credit 44% (71,700 cases) 43%
(55,038 cases)
(69,238 cases)
(20,099 cases)
insurance 42% (69,034 cases) 39.5%
(50,168 cases)
(27,286 cases)
(15,730 cases)
investments and pensions 14% (22,278 cases) 17.5%
(22,265 cases*)
(12,787 cases)
(12,429 cases)
mortgage endowments *mortgage endowment complaints included with investments and pensions *mortgage endowment complaints included with investments and pensions 11%
(13,778 cases)
(46,134 cases)
new cases in total 163,012 127,471 123,089 94,392

year ended 31 March

what financial products the new cases involved

financial product %
payment protection insurance (PPI) 30
current accounts 15.5
credit cards 11
mortgages 4.5
unsecured loans 4
consumer-credit products and services (eg hire purchase, debt collecting and catalogue shopping) 4
motor insurance 3.5
mortgage endowments 3.5
savings accounts 3
whole-of-life policies and savings endowments 2.5
pensions 2
buildings insurance 2
"with-profits" and unit-linked bonds 2
stockbroking and portfolio management 1.5
travel insurance 1
contents insurance 1
income protection and critical illness insurance 1
other products 8

what issues the cases involved

investments and pensions: 14%

of which

  • complaints about sales and advice: 62%
  • complaints about administration: 30%
  • other complaints: 8%

banking and credit: 44%

of which

  • complaints about charges (mostly involving financial hardship): 60%
  • complaints about administration: 23%
  • complaints about sales and advice: 6%
  • complaints about transactions: 5%
  • other complaints: 6%

insurance: 42%

of which

  • complaints about sales and advice: 66%
  • complaints about claims: 28%
  • administration: 6%

new cases by financial product or service

new cases by financial product or service year ended
31 March 2010
year ended
31 March 2009
payment protection insurance (PPI) 49,196 31,066
current accounts
including complaints about
25,252 13,682
  • financial hardship
13,213 2,394
  • business bank-charges
2,265 2,194
  • direct debits and standing orders
737 725
credit cards 18,396 18,590
mortgages 7,469 7,602
consumer-credit products and services
in relation to activities covered by our consumer credit jurisdiction - including complaints about
6,329 3,014
  • "point-of-sale" loans
1,735 770
  • hire purchase
1,430 762
  • catalogue shopping
755 316
  • debt collecting
697 407
  • store cards
574 372
  • credit broking
341 86
  • hiring, leasing and renting
283 92
  • debt adjusting
231 80
  • debt counselling
163 83
  • home credit
41 21
  • credit reference agency
40 12
investment-linked products
including complaints about
6,329 5,798
  • unit-linked bonds
2,453 1,824
  • investment ISAs
1,301 1,221
  • "with-profits" bonds
1,056 1,135
  • guaranteed-income bonds
595 610
  • "structured" products
273 203
  • unit trusts
192 191
  • PEPs
93 211
unsecured loans 6,285 4,242
motor insurance 5,451 6,267
mortgage endowments 5,400 5,798
savings accounts 5,033 5,183
whole-of-life policies and savings endowments 4,199 3,515
including complaints about
3,594 4,940
  • personal pension plans
1,727 2,173
  • SERPs
560 1,468
  • annuities
501 611
  • small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs)
475 373
  • income draw-down
158 130
  • free-standing additional voluntary contribution (FSAVC) schemes
99 115
buildings insurance 3,437 3,447
other types of general insurance
including complaints about
3,275 2,428
  • commercial vehicles and property
777 493
  • pet insurance
462 392
  • roadside assistance
226 179
  • "gap" insurance
224 128
  • business protection insurance
222 129
  • caravan insurance
82 82
other banking services
including complaints about
2,987 2,725
  • cash machines
964 821
  • cheque clearing
773 676
  • money transfer
606 516
  • electronic payment
453 514
  • safe custody
74 69
  • foreign currency
43 40
travel insurance 2,003 1,973
contents insurance 1,863 1,671
stockbroking 1,434 1,208
portfolio management 1,040 870
extended warranty insurance 863 754
income protection 776 774
private medical insurance 652 514
legal expenses insurance 644 489
critical illness insurance 598 586
personal accident insurance 274 199
including complaints about
233 136
  • spread-betting
191 109
total number of new cases 163,012 127,471

what the complaints were about: banking and credit

Complaints about banking and credit made up 44% of the total number of new cases we received during the year. The number of new cases relating to banking and credit increased by 30% - from 55,038 cases in the financial year 2008/2009 to 71,700 in the financial year 2009/2010.

This table shows how these banking and credit complaints were spread across different products and services.

type of complaint %
current accounts
credit cards
mortgages 10.5
unsecured loans
consumer-credit products and services
(eg hire purchase, debt collecting and catalogue shopping)
savings accounts
other banking services 4

current account complaints

year ended 31 March number of complaints
2010 25,252
2009 13,682
2008 39,263
2007 8,061
2006 3,543
2005 2,521

annual trend: +85%

During the year we have seen the number of complaints about current accounts almost double. In particular, we have received a growing number of complaints from consumers who tell us that their current-account problems relate to financial hardship they are experiencing.

Consumers in financial hardship may need a specific package of help from their bank - for example, in re-arranging long-term overdraft debt to more manageable terms, and reviewing the timings and amounts of direct debits, to make their current account less likely to tip over into unauthorised overdraft.

Pending the outcome of the "test case" legal proceedings that we have described in previous annual reviews, current-account providers, the courts and the ombudsman service all put complaints relating to unauthorised-overdraft charges on hold. However, we continued to deal with complaints involving current accounts and charges, where financial hardship was a significant issue.

The Supreme Court ruled on the "test case" on unauthorised-overdraft charges in November 2009. It ruled that the fairness of these charges could not be challenged on the basis proposed by the Office of Fair Trading (OFT). Following this unanimous legal ruling, we reviewed around 15,000 cases that we had put on hold. We were not generally able to progress those cases that involved "template" or "standard letter" complaints about charges.

But we continue to deal with individual complaints about current-account providers not dealing positively and sympathetically with a consumer in financial hardship - including where bank charges have added to the difficulties.

Our work on these cases has frequently been made more difficult by the superficial complaints-handling by some of the current-account providers involved - and by the failure of some claims-management companies acting for consumers to provide us with the level of information we required (or with any information at all, in some cases).

During the year we have continued to see complaints about disputed current-account withdrawals - involving plastic cards as well as over-the-counter transactions. As mentioned further on in this annual review (in relation to disputed credit-card transactions), these complaints generally turn on practical issues relating to the particular facts of the case, rather than on any complex technical issue.

We also regularly deal with complaints involving problems on joint current accounts, where the account-holders have fallen out over how the account should be used. In particular, we have received complaints that banks have been slow in "stopping" a joint account, after being told by one of the account-holders that the relationship had broken-up - leaving the other account-holder able to run up a joint debt.

During the year we received a spate of complaints about the sale of "packaged" current accounts, requiring the consumer to pay a monthly fee for various features provided by the account. In these cases, the consumers complained that the accounts had not been explained properly to them - and that they had not been made aware of the existence of more suitable current accounts which did not involve a monthly fee.

credit card complaints

year ended 31 March number of complaints
2010 18,396
2009 18,590
2008 14,123
2007 2,731
2006 2,124
2005 1,599

annual trend: -1%

During the year we continued to receive record high levels of complaints involving credit cards - following a 32% increase in the number of these cases in the previous year.

A substantial number of these cases involved disputes relating to section 75 of the Consumer Credit Act 1974 - under which the credit-card provider can be jointly liable with the supplier of the goods or services, if a consumer has a valid claim for misrepresentation or breach of contract.

During the year, cases involving claims under section 75 have included a significant number of complaints from consumers who had used their credit card to buy membership of "holiday clubs". Membership of these clubs - often costing a substantial four-figure amount - is supposed to result in special deals on flights and accommodation. But the consumers who complain to us about these arrangements say that the promised deals were not so advantageous when actually booked.

In many of these cases, we find that the business said by the consumer to have breached the contract - or to have made the misrepresentation - does not have the necessary legal connection to the business that actually received the credit-card payment. This means that section 75 cannot apply - so the complaint against the supplier of the credit cannot succeed.

We also continue to see a steady stream of complaints about promotional rates and special balance-transfer deals on credit cards. Where we uphold these cases, it is generally because the written terms and conditions were unclear or because the arrangements were not fully understood - and explained - by the staff who sold the credit card.

As in previous years, we have received a significant number of complaints about so-called "default charges" on credit cards - which consumers have to pay if they miss a payment, pay late, or exceed their credit limit. We are usually able to resolve these complaints informally - with the credit-card providers settling their customers' claims without the need for a formal ombudsman decision.

During the year we continued to receive complaints about disputed credit-card transactions - but the number of these complaints has levelled off. These cases continue to turn on practical issues to do with the individual circumstances involved, rather than on any complex technical issue.

In last year's annual review, we mentioned complaints we had received about the increase in the rate of interest charged on some customers' credit-card accounts. The credit-card providers said that this reflected a move to "risk-based re-pricing".

We received only a small number of complaints about this during the year, following the Government-initiated industry code, setting out how card providers should deal with re-pricing on this basis. This code included provisions that enabled consumers to avoid having their existing debt charged at the new higher rate - the main issue raised by most of the consumers who complained to us.

complaints about mortgages

year ended 31 March number of complaints
2010 7,469
2009 7,602
2008 6,824
2007 4,366
2006 3,942
2005 3,001

annual trend: -2%

During the year the mortgage-related complaints we received largely reflected the tougher economic environment - with mortgage lenders in a contracting market either unable or unwilling to lend, and showing much more caution in response to requests for increases or changes to mortgage facilities already in place.

For example, we have seen a growing number of complaints about mortgage offers being withdrawn, or not renewed, where property purchases were not completed on time. We assess these cases taking into account their own individual circumstances - but we expect lenders to treat their customers fairly. So, for example, in these types of cases we would expect a lender to be able to point to a specific change in the consumer's circumstances rather than just a change in its own scoring criteria for lending.

The same principles apply to changes made to flexible mortgage facilities that form part of products such as "offset" accounts. We saw a number of complaints during the year about the way in which this type of mortgage account operates, in circumstances where money paid in to reduce the mortgage was no longer available for withdrawal - or where "contingent" facilities (for example, built up through "over-payments") had been withdrawn or reduced. The terms of flexible mortgages should be both clear and fair. We have not always found this to be the case.

Complaints about "porting" (transferring) mortgage products have been less of an issue this year in the cases we have seen - with evidence of lenders making efforts to accommodate requests from residential mortgage customers to "port" their mortgage facilities. However, we have seen more complaints relating to "porting" from buy-to-let customers - possibly reflecting the fact that lenders have withdrawn from this market or are seeking to reduce their exposure.

Disputes relating to interest rates have been a significant feature of the mortgage-related complaints we have dealt with this year. Consumers have complained to us about standard rates set by lenders, rates not tracking changes in the base rate, the speed of changes made to variable rates, and the removal of interest rate "collars" by some lenders in response to exceptional market conditions.

We have also seen an increase in complaints about the suitability of fixed-interest mortgages, where consumers believe that a mortgage linked to a discounted or tracker-rate should have been chosen instead. And we have seen more disputes involving mortgage transfers completed without a signed acceptance - usually following a phone conversation between the consumer and the lender. In some of these cases, by not having clear documentation as evidence of their contact with the customer in relation to the disputed events, lenders seem to have left themselves open to claims that the consumer never consented to the transfer.

We will not generally get involved in disputes that ultimately turn on the legitimate commercial judgement of a lender in matters such as the setting of interest rates. But we will consider carefully the legal fairness of interest-rate variation-terms in mortgage contracts, where this forms part of a complaint brought to us by a consumer. In the complaints we see, consumers often expect variable interest-rates to track the base rate - but this is often not a term of the mortgage contract.

We continue to receive complaints about the handling of mortgage arrears - and our aim is to identify and prioritise cases that involve genuine financial hardship, in line with our policy across all areas of casework. During the year we have received fewer complaints from claims-management companies on behalf of consumers in mortgage arrears - and the cases we have seen largely involved mortgage accounts that had already been redeemed.

We remain committed to resolving disputes involving hardship through mediation wherever possible - and we have been able to settle a large number of mortgage cases informally, where the consumer was struggling to meet their contractual payments. This approach has been helped by the continued regulatory focus in this area, including the publication by the FSA of its Mortgage Market Review.

"Sale and rent-back" (by homeowners who can no longer afford their mortgages but wish to stay on as tenants) came within our "compulsory jurisdiction" on 1 July 2009, when it became regulated by the FSA. We have had few enquiries on this topic so far - and only one complaint.

complaints about unsecured loans

year ended 31 March number of complaints
2010 6,285
2009 4,242
2008 2,940
2007 1,755
2006 1,507
2005 1,133

annual trend: +48%

During the year, the number of complaints about unsecured loans rose by 48% - following a similar increase in the previous year. Many of these complaints involved consumers who were experiencing financial hardship and did not feel their lenders had treated them fairly.

In complaints where financial hardship is an issue, the individual consumer's personal and financial circumstances are key to any decision we make on what "fair treatment" should involve in their case. We do not apply a "one size fits all" solution.

In some of these cases, consumers also argued that their loan agreement was "unenforceable at law". However, the arguments raised generally seemed to us to be based on misunderstandings about the effect of the law on which they were basing their claim. And as the ombudsman service is not a court of law, we have no power to declare a loan agreement unenforceable in any event.

We also continued to receive complaints about the rates of interest that lenders were applying to variable-rate loans. Many consumers complained that they could not understand why, given the low Bank of England base rate during the year, the variable rate charged on their loan had gone up, not down. In complaints like this, we look carefully at what the terms and conditions of the loan say about interest-rate changes and whether this properly takes account of the relevant law.

complaints about consumer credit

year ended 31 March number of complaints
2010 6,329
2009 3,014
2008 849

annual trend: +110%

Complaints about consumer credit doubled during the year - following a three-fold increase in the previous year. It is now three years since the range of credit-related complaints we cover was extended by law beyond loans and credit cards provided just by banks and building societies (which have been under our remit since we were first set up) - to cover a wide range of other businesses involved in consumer credit, including loan firms, hire-purchase operators, debt collectors and catalogue-shopping companies.

The swift growth in the number of these types of complaints over this three-year period suggests that businesses with a standard consumer-credit licence (who are now covered automatically by the ombudsman) have adapted quickly to having complaints-handling arrangements - and an ombudsman - for the first time.

And our customer research into the types of consumers who use the ombudsman service shows that people now using their new right to bring complaints about consumer credit come from a much wider range of backgrounds than before. We believe this is a result of the focused consumer-outreach work we have carried out as part of our commitment to diversity and accessibility.

During the year, we have seen a three-fold increase in the number of complaints brought to us about fee-charging "debt management" businesses. These businesses undertake to liaise with the creditors of consumers who have problem debt, agreeing repayment arrangements and administering the monthly payments on the consumer's behalf.

Typically, consumers complain to us that a debt management company has taken money from them each month but failed to pass it on to their creditors. We have also received complaints about poor administration of debt management plans by these businesses - with delayed payments or payments for the wrong amount. This can have very serious consequences for the consumer - such as legal action against them and the registration of further adverse credit-reference information.

We saw a 71% increase during the year in the number of complaints about debt collecting. These cases involved consumers complaining either that they were being pressed to make repayments in excess of what they could afford, or that the debt collector had not pursued the debt reasonably. This can include complaints about excessive numbers of phone calls made to the consumer while at work or in the evenings. We also continued to receive complaints from consumers who were targeted by debt collectors who had confused them with someone else, for payment of a debt they did not actually owe.

During the year, the largest percentage increase in complaints we received relating to consumer credit involved credit broking - with cases up four-fold. In particular, we received a significant number of complaints about businesses that take an up-front fee for arranging consumer credit. Typically, consumers complain to us that they paid the fee on the understanding that the finance had already been sourced or was guaranteed at a particular rate - but it later emerged that there was no finance, or that it was only available at much higher rates.

We also received an increasing volume of complaints about car finance - mainly hire purchase or loans arranged through the car showroom (known as "point of sale loans"). Most of these complaints concerned the quality of the car - ranging from faults in brand-new vehicles to problems with older cars.

We were able to deal with these complaints because of provisions in consumer law that make providers of credit liable for faults in the goods, in certain circumstances. We frequently found that businesses had done little to understand and evaluate the consumer's complaint about the car - often mistakenly arguing they had no responsibility for the condition of the vehicle and simply directing the consumer back to the garage.

complaints about savings accounts

year ended 31 March number of complaints
2010 5,033
2009 5,183
2008 2,675
2007 1,438
2006 1,233
2005 1,154

annual trend: -3%

Following the two-fold increase in complaints about savings accounts in the previous year, the number of these complaints fell slightly in the 2009/2010 financial year.

The complaints we saw about savings accounts continued to relate primarily to problems with poor administration by some savings-account providers - including delays in opening accounts and transferring balances between providers.

We also continued to see cases where consumers complained that money from maturing savings accounts and bonds had been transferred to a low-interest account without adequate advance warning.

complaints about other banking services

year ended 31 March number of complaints
2010 2,936
2009 2,725
2008 2,643
2007 1,748
2006 1,360
2005 1,083

annual trend: +8%

From the end of May 2008 most banks started offering the new faster payments service for payments over the internet and by phone. This reduced the number of complaints we received during the year about delays in payments getting through.

But the faster process has been less welcome where the consumer made the payment by mistake - or where the payment was fraudulent. This is because the more quickly the payment goes through, the less opportunity there is to put things right, if necessary - before the money becomes available to the person receiving the payment. This situation has led to a number of complaints during the year.

We continue to receive a steady stream of complaints involving international money transfers. In these cases the consumers often complain that the bank failed properly to explain the cost, timescale or currency arrangements that would apply. The forms used for these transfers are sometimes unclear or ambiguous in parts. In some of the cases we dealt with during the year it appeared to us that both the consumer and the bank's member of staff had struggled to complete the form correctly.

We also continued to receive complaints about the cheque-clearing cycle - where the problems stemmed from bank staff misunderstanding or wrongly explaining the position. A small number of complaints we received related to money-transfer cheque scams. These typically involve fraudsters targeting consumers with an arrangement under which the consumer sends funds abroad by money transfer in return for a cheque for a larger amount - that then turns out to be fraudulent.

In a similar vein, a number of complaints were brought by students who had been asked to clear cheques for a "friend of a friend". In these cases, the students had drawn money from their accounts in return for a cheque - and had handed over their cash just before learning that the cheque was fraudulent.

what the complaints were about: insurance

Complaints about insurance made up 42% of the total number of new cases we received during the year. The number of new cases relating to insurance increased by 38% - from 50,168 cases in the financial year 2008/2009 to 69,034 in 2009/2010.

This increase largely resulted from the further 58% rise in the number of complaints about payment protection insurance (PPI) - from 31,066 in 2008/2009 to 49,196 in 2009/2010.

We also dealt with an 11% increase in complaints relating to contents insurance, a 14% increase in complaints about extended warranties, a 27% increase in complaints about private medical insurance, a 32% increase in complaints about legal expenses insurance, and a 38% increase in the number of complaints relating to personal accident insurance.

However, the number of complaints we received during the year about motor insurance fell by 13% - and complaints about buildings insurance, income protection and travel insurance remained at similar levels to the previous year.

The chart below shows how these insurance complaints were spread across different products and services.
type of complaint %
payment protection
motor 8
extended warranty
commercial and business protection
income protection
critical illness
legal expenses
private medical
other (eg pet, roadside assistance and personal accident) 3.5

payment protection insurance (PPI)

year ended 31 March number of complaints
2010 49,196
2009 31,066
2008 10,652
2007 1,832
2006 1,315
2005 833

annual trend: +58%

We reported in last year's annual review that the number of complaints we had received about payment protection insurance (PPI) had tripled - following a five-fold increase in the previous year. In the financial year 2009/2010 the number of PPI complaints referred to the ombudsman service increased yet again - with the volume of new cases rising by a further 58% to 49,196.

A small proportion of the PPI complaints we receive relate to claims made by consumers under their PPI policies. But the vast majority of our workload involves complaints about the sale of PPI policies. A high volume of these cases involve 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 continue to see a significant number of cases relating to payment protection insurance sold alongside credit cards.

We reported in last year's annual review that mortgage payment protection insurance (MPPI) and other forms of payment protection had not given rise to significant numbers of complaints to the ombudsman service - and this has remained the case this year.

In last year's annual review we also set out some of the common areas of dispute in complaints about the sale of PPI. The cases we have dealt with this year have followed a similar pattern in terms of the issues involved. Our well-established approach to assessing PPI complaints is set out in detail in the "technical resource" section of our website.

In deciding complaints about the sale of PPI policies, we look carefully at all the evidence. We consider what happened during the sale process - and whether the business involved met all its obligations in providing the customer either with advice or with a proper explanation of the features of the policy. Where we conclude that the business did not do so, we assess the impact of this - and whether the consumer would still have taken out the policy if the business had met its obligations.

As volumes of PPI complaints have continued to increase, a particular area of concern to us has been the failure on the part of some businesses to engage properly with the individual details of each complaint. Similarly, we have seen too many complaints - brought on behalf of consumers by claims-management companies - where insufficient attention has been paid to the individual issues in dispute.

This is why we wrote to businesses and claims-management companies in April 2009, setting out our concerns and urging improvements in the way they handled complaints.

We have subsequently seen some improvement in the standard of complaints handling - but this has not yet resulted in any reduction in the volumes of cases referred to us. And the overall quality remains patchy. In particular, a number of businesses continue to reject complaints - which consumers then bring to us - where the individual circumstances clearly indicate that the case should have been upheld.

And some claims-management companies continue to refer complaints to us that comprise only general allegations, rather than specific arguments and information reflecting the true position of the individual consumers involved.

We would like to see businesses and claims-management companies make a stronger commitment to improvements in the coming year - and we will continue to work with relevant regulators where we see behaviour that is unhelpful or detrimental to the fair and proper handling of consumers' complaints.

During the early part of 2010 we developed new standard complaint-documentation for PPI disputes, to encourage more efficient, co-ordinated and consistent complaints-handling processes across the financial services industry. We introduced this documentation following consultation with industry and consumer stakeholders who shared feedback with us, based on their own experience and perspective.

The new complaint-documentation consists of two standard forms - the consumer questionnaire to be completed by consumers when bringing a PPI complaint (either to a business or to the ombudsman service) and the business response form to be completed by businesses when a complaint is referred to us. Each form has been carefully designed to bring together as many relevant facts and arguments as possible in one single process. This should lead to a more effective and streamlined operation for dealing with PPI complaints fairly and swiftly.

The FSA referred to the introduction of this new standard documentation for PPI complaints in its consultation paper, CP09/23: the assessment and redress of payment protection insurance complaints, published in September 2009. This paper set out the regulator's proposals in relation to PPI, following the formal referral of our concerns in this area to the FSA under the "wider implications" process in July 2008. We gave details of this in last year's annual review.

The FSA received detailed responses to its consultation paper CP09/23 from a wide range of stakeholders. Consumer groups were very supportive of the proposals but PPI providers and industry groups were highly critical. The FSA published a further consultation paper, CP10/6, in March 2010. We hope that the regulator's proposals will be finalised as soon as possible - and that the improved complaints-handling processes subsequently put in place by businesses will result in a significant reduction in the volume of PPI complaints referred to the ombudsman service.

In the meantime, however, we are geared up for handling continued high volumes of disputes about PPI in the coming year.

motor insurance complaints

year ended 31 March number of complaints
2010 5,451
2009 6,267
2008 6,009
2007 4,230
2006 3,372
2005 2,571

annual trend: -13%

The most significant feature of our work on complaints about motor insurance in the financial year 2009/2010 was the 13% fall in the number of cases we received - and the decline in the proportion of cases where the outcome changed as a result of our involvement.

These are both welcome developments, reflecting discussions we have had during the last two years with individual insurers and the Association of British Insurers (ABI) about the handling of motor claims and complaints. These discussions addressed concerns we had about some specific practices that appeared to us to be unfair or unreasonable in the way they were being applied in the cases we saw.

The major focus of our dialogue was the approach adopted by insurers to the valuation of cars that had been written-off. Our own approach to this is set out in our technical note, motor insurance: vehicle valuation, published in July 2009. We also had concerns about the way in which some insurers investigated consumers' complaints about the quality or timeliness of repairs to cars.

During the year we received an increasing number of complaints about the charges levied by insurers and intermediaries for cancelling or administering motor insurance policies. We also received more complaints about the activities of price-comparison websites and credit hire companies (sometimes known as "accident management" firms). Although the level of complaints we see in these areas is still relatively low, we will be raising these issues with relevant stakeholders.

complaints about buildings and contents insurance

year ended 31 March buildings insurance complaints
2010 3,437
2009 3,447
2008 2,669
2007 1,951
2006 1,951
2005 1,624

annual trend: -0.3%

year ended 31 March contents insurance complaints
2010 1,863
2009 1,671
2008 1,363
2007 1,238
2006 1,224
2005 1,145

annual trend: +11%

During the year we saw a small increase of 3.5% in the number of complaints referred to the ombudsman service about household insurance (covering buildings and contents). This follows an increase in the previous year of more than 25%.

The disputes we see continue to cover a full range of issues, including claims relating to subsidence, floods, storm and fire damage, as well as theft and accidental damage. The most common cause of disputes continues to be the refusal of insurers to pay a claim. However, dissatisfaction with the quality and timeliness of repairs forms an increasing proportion of our work.

Theft, damage and destruction to personal property inevitably cause shock and disruption. At a time when people are struggling to sort things out - physically and sometimes emotionally - they also face the paperwork and procedures involved in making an insurance claim.

In our experience, the involvement of surveyors and other experts on both sides can intensify differences of view. When it comes to matters relating to the family home, consumers naturally have high expectations and very clear views as to how and when they want things put right. Insurers and those they appoint to assess claims or provide a service can sometimes seem unresponsive. Where emotions spill over, this can make complex negotiations and processes more fraught.

These kinds of situations regularly form the backdrop to the disputes we deal with involving household insurance. They contribute to the significant increase in the proportion of these cases - one in four - that are now appealed to an ombudsman for a final decision. These situations can also add to the difficulty we sometimes face in resolving disputes like these in the timescales we set ourselves.

travel insurance complaints

year ended 31 March number of complaints
2010 2,003
2009 1,973
2008 1,628
2007 1,670
2006 1,787
2005 1,525

annual trend: +2%

We have seen a levelling-off in the number of travel insurance complaints referred to the ombudsman service during the year - following a 21% increase in the previous year.

Almost all the cases we see relating to travel insurance involve disputes over the payment of claims. The extension of our remit in January 2009, to enable us to look at complaints about the sale of travel insurance sold alongside a holiday or other travel, has resulted in only a small number of complaints. However, indirectly it has helped us in our work handling disputes involving claims where the underlying problems go back to when the travel policy was sold.

Our work settling disputes involving all types of insurance products enables us to compare differences in standards between one area of insurance and another. In the disputes referred to us, we frequently see travel policies where the information provided to the consumer has been poor, compared with the standards of information in other types of policy.

In the cases we see, consumers taking out travel insurance are also clearly less willing to take the time to understand the cover they are buying than consumers taking out other forms of insurance. This means that travel policies probably remain the least well explained and understood of the types of insurance that consumers are most likely to buy.

health and medical insurance complaints

year ended 31 March number of complaints
2010 2,026
2009 1,874
2008 1,839
2007 1,959
2006 2,291
2005 2,034

annual trend: +8%

The number of complaints we received about private medical insurance increased by 27% to 652 cases during the year - but the level of complaints about income protection and critical illness insurance has remained stable year on year.

This trend reflects the continuing improvement we have seen in the quality of claims handling in the "protection" sector. We have referred in previous annual reviews to our initiative with this sector, to help ensure that reasonable standards are applied to the handling of claims (and complaints) involving alleged "non disclosure" of medical information by consumers.

As a result of this initiative, insurers are now reporting a significant increase in the proportion of claims they are paying in relation to critical illness policies. The initiative has also had the effect of reducing the number of disputes referred to the ombudsman service about critical illness policies.

The disputes that we continue to see relating to health and medical insurance generally involve complex and distressing circumstances. In many cases we are asked to decide between apparently conflicting positions taken by doctors and consultants, who are either advising the insurer or treating the consumer.

In these situations, we rarely find it helpful to seek yet further medical opinion - or to substitute the expertise of the specialists already involved with our own medical opinion. Instead, we press the parties and their medical advisers to focus on - and clarify - their medical opinions on the specific issues that are relevant to applying the terms of the policy fairly. In most cases, this focus will then enable us to reach our conclusion on what we believe is fair and reasonable in the individual circumstances of the case.

what the complaints were about: investments and pensions

Complaints about investments and pensions made up 14% of the total number of new cases we received during the year. We received 22,278 investment and pension-related cases - just 13 more than in the previous year.

However, the levelling-off generally of complaints about investments and pensions masks some significantly diverse trends in relation to complaints about specific products. For example, complaints about personal pension plans fell by 20% and complaints about annuities decreased by 18%. But cases involving unit-linked bonds rose by 34% and portfolio-management complaints increased by 20%.

Mortgage endowments remained the most complained about investment product. The number of complaints in this area continued the recent downwards trend - with 5,400 new cases during the year from a peak of 69,737 cases in 2004/2005 - although the decline was slower than in previous years.

This table shows how these investment and pension-related complaints were spread across different products and services.
type of complaint %
mortgage endowments 24
whole-of-life policies and savings endowments 19
unit-linked bonds 11
personal pension plans 8
investment ISAs
"with-profits" bonds 5
portfolio management
guaranteed-income bonds 2.5
small self-administered schemes (SSASs) and self-invested personal pensions (SIPPs)
derivatives (including spread-betting) 1
unit trusts 1
"structured" products 1
other products 4

complaints about mortgage endowments

year ended 31 March number of complaints
2010 5,400
2009 5,798
2008 13,778
2007 46,134
2006 69,149
2005 69,737

annual trend: -7%

In the financial year 2009/2010 we received 5,400 complaints about mortgage endowments. This continues the recent downwards trend, although at a gentler pace than in previous years.

In around half of the mortgage endowment complaints we handled during the year, the business involved raised objections to our handling the case, because it believed that the time limits set under the FSA's complaints rules had already expired. Where this is so, we cannot look at the merits of a case unless there are exceptional circumstances that prevented the consumer from bringing their complaint in time.

On considering the facts involved in many of these cases, it is evident that the complaints were not brought in time. This means we have to explain to the consumer why we are unable to consider the merits of their case - because under the regulator's rules they have left it too late to complain.

The majority of complaints about mortgage endowments where the time limits for complaining have not yet expired - and which we are therefore able to assess - continue to centre around the risks of the policy. This involves our deciding - in each individual case - whether the financial business did enough to help the consumer understand the risk that the endowment policy might not perform well enough to pay off their mortgage.

Though the number still remains small, we have seen more cases during the year where consumers complain about the information in "re-projection letters" they are sent as their endowment policy approaches maturity. In assessing these complaints, we look closely at the information the business gave the consumer.

We consider whether the consumer has been misled in any way - and if so, whether this was likely to have affected decisions they subsequently took. In these cases, we sometimes find that although the information provided by the business was not as clear as it might have been, the consumer would probably not have acted differently even if it had been clearer.

In the coming year we expect to continue to receive a small but steady stream of disputes about the sale of mortgage endowment policies - especially as increasing numbers of endowment policies 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
2010 4,199
2009 3,515
20008 3,211
2007 3,734
2006 4,163
2005 4,506

annual trend: +19%

The complaints referred to the ombudsman service about whole-of-life policies generally fall into a number of clearly-defined categories. These categories include complaints about reviews of "reviewable" whole-of-life policies - where the original assumptions (particularly in relation to investment returns) have not been met. This resulted in either a reduction in the life cover or an increase in the premiums.

Other categories we frequently see include complaints about the risk of the funds chosen to support the life cover; complaints about the failure of businesses to carry out reviews at the correct time; and complaints that the policy was not suitable for the consumer in their particular circumstances.

In these cases a key consideration is the prominence of information given to consumers at the outset - warning that this type of policy would be subject to review and explaining what this could mean for the consumer. Where we uphold complaints in relation to whole-of-life policies, the redress can range from our directing the business involved to refund premiums paid by the consumer (with or without a deduction for life cover) to telling the business to provide guaranteed cover (or cover on another basis).

We continue to receive a steady stream of complaints from consumers who are disappointed with the returns on their savings endowment plans - and who tell us that they had expected a better return from these products than they would have received from a deposit account.

Savings endowment plans can be inflexible products that may need to be held for many years before they produce a worthwhile return. So in looking at complaints about these plans, we would not usually consider them suitable for people such as those approaching retirement, who have a limited "time horizon" for investing.

complaints about investment-linked products

year ended 31 March number of complaints
2010 6,329
2009 5,798
2008 2,750
2007 3,644
2006 5,810
2005 8,213

annual trend: +9%

During the year we have continued to receive a significant number of complaints about investment-linked bonds relating to recent periods of volatility in the markets.

A particular group of cases involved a specific high-street financial institution that targeted the sale of investment bonds at older consumers. In these cases, the consumers were usually investing money for their retirement and frequently had little or no previous investment and savings experience beyond deposit-based accounts.

The bonds concerned contained a degree of risk that prompted us to ask whether the consumers understood and were suited to this type of financial product. We upheld many of these cases in favour of the customers, as the financial institution was unable to persuade us that these consumers would have been looking for extra financial risk given their age.

In assessing complaints like these, the individual circumstances of the consumer at the time of the sale are vital. It is evident that some businesses believe that giving us copies of the product literature - containing explanations of how the product worked - should be enough to convince us that consumers must have been aware of, and have accepted, the risk inherent in the product.

However, the product literature we see is not always as clear as it should be. And in any event, in these cases a consumer seeking advice is entitled to assume that their own personal circumstances have been taken fully into account, when they are given an investment recommendation. We always look closely at the investment experience of the individual consumer concerned - and their specific requirements and likely investment "time horizon" at the time of the sale.

During the year we have again received a number of complaints from consumers about the management of certain "with-profits" funds - with concerns that the risk of these funds had been placed on the consumer rather than on the fund itself. These are essentially regulatory issues, and we continue to refer them to the FSA under the formal "wider implications" procedure, described in previous annual reviews.

We have again received complaints during the year about the make-up and description of funds. Consumers have complained to us that they believe the description of some funds as "cautious" failed to reflect the real risks involved. In particular, consumers have complained to us that "cash" as a description of a fund is a word they understand as meaning a safe deposit for funds, with no risk to capital.

complaints about pensions

year ended 31 March number of complaints
2010 3,594
2009 4,825
2008 5,297
2007 3,687
2006 4,053
2005 4,214

annual trend: -27%

It can be difficult for some consumers to put into words the exact nature of their complaint. They may know that something has gone wrong but they are unable to pinpoint the exact problem. This is particularly the case with pension-related complaints, where the underlying issues can be complex, both to identify and to explain.

This can mean that a complaint, which may appear on the surface to be about administration matters or performance issues, could actually involve something more deep-rooted or technical. Because we are required to reach decisions based on all the circumstances of a case, we sometimes need to look "behind" the consumer's explanation of their complaint to find the real underlying cause of the problem.

During the year we have continued to receive pension-related complaints about "switching" - where the consumer has been advised to transfer their pension fund from one policy to another. A recent review by the FSA into advice involving switches showed that advisers were not always considering all the issues that could make a switch more, or less, suitable for the consumer. We take into account the issues identified by the FSA when we investigate a complaint that turns on the suitability of the advice to switch.

Switching from one pension arrangement to another can be beneficial for the consumer - but the cost of switching, or the charges applying to the new arrangements, have to be fully considered by the adviser. This is because where costs are incurred, or where higher charges are applied, the new investment will have to work harder simply to match what might have been expected from the old arrangement. This can require the consumer to accept more risk - both in relation to the investment of their pension fund and in terms of the possibility of lower retirement benefits.

The tougher economic environment has affected the type of pension-related complaints we have seen during the year. For example, the fall in the value of investments linked to commercial property has shown that many consumers who have complained to us did not fully understand investment risk - and could not afford to take risk with their pension funds.

In the cases we see, some advisers operate on the basis that they will not monitor investments or provide further advice - unless specifically asked to do so, or unless the particular pension arrangement requires regular advice. However, generally speaking, the closer the relationship between the consumer and the adviser on an ongoing basis, the less likely that problems will escalate into full-blown disputes - if things do not turn out as the consumer expected.

complaints about stockbroking and portfolio management

year ended 31 March number of complaints
2010 2,474
2009 2,078
2008 1,209
2007 1,052
2006 975
2005 1,056

annual trend: +19%

During the year the FSA took enforcement action against a number of stockbroking businesses, where it found consumers had been subjected to pressurised sales of high-risk shares, often without the risks having been properly explained.

This reflected what we saw ourselves during the year, with a significant number of complaints about high-pressure selling by certain stockbroking firms - one of which was responsible for 10% of complaints to us in this area. Where firms like these subsequently went out of business, we referred complaints that consumers had brought to us to the Financial Services Compensation Scheme (FSCS), as the fund of last resort.

Other stockbroking disputes we handled in the year related to market volatility. These included complaints where businesses cited extreme market conditions for not executing trades on time - or in some cases, at all. We also saw an increase in the number of complaints about portfolio managers not responding quickly enough to difficult investment conditions.

During the year we continued to see disputes relating to investment funds that contained floating-rate notes and mortgage-backed securities, where investors complained that the funds were higher-risk than they had been led to believe.