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annual review 2011/2012

1 April 2011 to 31 March 2012

how we dealt with the complaints

number of cases we resolved

We continued to settle cases at record levels - resolving a total of 222,333 cases in the financial year 2011/2012. This is 35% higher than the 164,899 cases we resolved in the previous year - and the highest number in any year since the ombudsman service was set up in the year 2000.

year ended
31 March
cases resolved
2012 222,333
2011 164,899
2010 166,321
2009 113,949
2008 99,699
2007 111,673
2006 119,432
2005 90,908
2004 76,704
2003 56,459

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 the views or informal settlements that our adjudicators may suggest.

But more complex or sensitive disputes may require detailed investigations and lengthy reviews, including an appeal to one of our panel of 110 ombudsmen for a final decision.

cases appealed to an ombudsman for a final decision

year ended
31 March
cases appealed
2012 20,540
2011 17,465
2010 10,730
2009 8,674
2008 7960
2007 6,842

During the year, the number of cases requiring the direct involvement of an ombudsman - and a formal ombudsman decision - continued to rise.17,465 cases had a final decision by an ombudsman in the financial year 2010/2011 - rising 18% to 20,540 cases in 2011/2012.

9% of cases we settled during the year required an ombudsman to make a final decision - as the last stage of our process. The proportion of cases appealed to an ombudsman has been slowly rising over recent years - from 6% in 2006/2007 to the current figure of 9%. This reflects a trend we have commented on in previous years' annual reviews. This is the shift towards more entrenched disputes - with businesses increasingly taking a harder-fought and legalistic approach, and consumers becoming more demanding and less willing to concede.

Of the final decisions made by ombudsmen during the year, 36% of requests were made by financial businesses and 64% by consumers (38% and 62% respectively in the previous year).

In 86% of final decisions, ombudsmen reached the same basic conclusions as the adjudicators who handled the cases in the earlier stages. Where they did not do so, there was usually a finely-balanced judgement call or, more often, new facts came to light only at that very late stage.

which complaints were more likely to require an ombudsman decisions? %
pensions 30
other investments 29
general insurance (excluding PPI) 21
mortgages 20
consumer credit 13
banking 12
payment protection insurance (PPI) 2

Proportionately more cases were referred to an ombudsman for a final decision where the dispute related to pensions and investments - generally reflecting the complexity of these disputes, the larger amount of money often at stake, and the socio-demographic background of many of the consumers involved.

ombudsman decisions - by product %
banking 27
general insurance (excluding PPI) 27
investments 16
payment protection insurance (PPI) 12
mortgages 9
pensions 5
consumer credit 4

Younger people remain statistically less likely to request a formal ombudsman's decision than consumers of other ages. In fact, the proportion of cases requiring an ombudsman's final decision increases by age group. However, this largely reflects the types of financial products involved - with older people more likely to have more complex products such as pensions and investments.

"… men and women requested ombudsman decisions in broadly equal proportions"

However, the proportion of men and women who requested a final decision by an ombudsman remained broadly similar - as did the proportion of requests made by consumers from different faith and ethnic groups. There is more information about the diversity of our customers - and their experience of our service - in this annual review.


As part of our work resolving complaints, our rules allow us to hold hearings - face-to-face meetings - held either in public or private. We can also hold hearings over the phone, where this is more convenient for everyone involved. Hearings are generally as informal as possible.

During the year we again held fewer than 20 hearings in cases where the ombudsman considered that it would help them get to the bottom of a case. We hold hearings only where the ombudsman believes a case cannot be fairly decided on the basis of the documentary evidence and the material that the two sides have already provided.

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 just to allow either side to confront the other in person - and neither side is given a private meeting with the ombudsman deciding the case.

how we record the outcome of cases we resolve

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).

% of complaints where the outcome changed as a result of our involvement ("we upheld the complaint")

insurance complaints

insurance complaints 2010 2011 2012
payment protection insurance (PPI) 89% 66% 82%
motor insurance 38% 45% 49%
buildings insurance 43% 42% 50%
contents insurance 38% 41% 52%
travel insurance 44% 42% 52%
health insurance 35% 43% 40%

banking and credit complaints

banking and credit complaints 2010 2011 2012
current accounts 20% 28% 31%
credit cards 68% 61% 54%
mortgages 37% 37% 28%
unsecured loans 48% 43% 37%
consumer credit 58% 47% 51%
savings accounts 51% 42% 44%
other banking services 46% 43% 41%

investment complaints

investment complaints 2010 2011 2012
mortgage endowments 38% 31% 28%
whole-of-life policies and savings endowments 26% 32% 30%
investment bonds 45% 60% 51%
pensions 28% 38% 38%
stockbroking and portfolio management 49% 66% 57%

year ended 31 March

In total we upheld 64% of the complaints we settled in the financial year 2011/2012 - compared with 51% of cases in the previous year.

This figure varied across complaints involving different financial products. For example, during the year we upheld in favour of the consumer:

  • 82% of the cases we resolved involving mis-sold payment protection insurance - where our long-standing approach, explained on our website, was endorsed during the year by the High Court in response to a legal challenge by the banks.
  • 31% of the cases we resolved involving current accounts - where a ruling by the Supreme Court in November 2009 means we cannot generally help with complaints that charges are unfair or too high.

complaints data about named businesses

Since September 2009 we have been publishing complaints data on our website every six months about named individual businesses. The data shows the number of new complaints - and the proportion of complaints we upheld in favour of consumers - for businesses that have 30 or more new cases (and 30 or more resolved cases) in each six-month period. The complaints data shows that:

  • 160 or so businesses (out of more than 100,000 covered by the ombudsman service) together generate around 90% of our complaints workload.
  • The number of complaints relating to each individual business included in the six-monthly data has ranged from 30 to 19,569.
  • The proportion of cases we uphold in favour of the consumer varies substantially from business to business - between 2% and 98%.

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 distress and inconvenience - following our long-standing approach, set out on our website. We did this in 18,813 cases during the year - 14% of the cases we upheld - generally awarding between £150 and £500.
  • Directing the business to do something (or not do something), 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 appropriate redress).

what redress do ombudsmen tell businesses to pay in individual cases?

year ended 31 March %
telling the business to take actions to put things right that don't have a direct cash value (for example, correcting a credit reference) 23
redress up to £1,000 23
£1,001 to £25,000 30
£25,001 to £100,000 5
more than £100,000 * 1
telling the business the basis or formula on which they must pay compensation (for example, where specialist calculations need to be carried out by an actuary) 18

*The ombudsman can tell a business to pay compensation of up to £100,000 (£150,000 for complaints we received from 1 January 2012) - and can recommend that the business pay compensation in excess of this amount.

The figures in this table do not include any additional amounts that we might tell a business to pay, to compensate a consumer for distress and inconvenience.

We continue to see many entrenched disputes that could have been avoided - if there had been better communication between the financial business and the customer. Too many problems stem from simple misunderstandings that should have been cleared up at the outset.

our aim is to give a clear explanation - from an entirely impartial standpoint

We know that some consumers express their problems in an unfocused way that may make them seem unreasonable to the business they complain to. But we also see some businesses responding to customer concerns unhelpfully and defensively - aggravating problems that a clear, helpful and sympathetic explanation might have resolved.

Just because we might not uphold a complaint on its merits does not mean that the consumer may not genuinely feel upset and let down by the way the business treated them. Similarly, a consumer's failure to present a reasoned argument does not automatically mean that a case has no merit - or that the complaint should be categorised as "frivolous and vexatious".

Of the 222,333 complaints we settled during the financial year 2011/2012, we concluded that 5,667 cases (2.5% of the total) could be categorised as "frivolous and vexatious" (0.9% in the previous year).

99% of these cases involved complaints about mis-sold payment protection insurance (PPI) where it emerged that no policy had ever actually been sold. We published information on our website during the year about our approach in these cases.

We do not charge a case fee to the business complained about where we decide that a complaint is "frivolous and vexatious".


time taken to resolve cases

year ended 31 March resolved within 3 months resolved within 6 months resolved within 9 months resolved within 12 months
excluding PPI complaints
38% 72% 82% 86%
all cases
28% 66% 82% 86%
2011 41% 70% 81% 87%
2010 38% 67% 81% 89%
2009 30% 56% 77% 88%

The table above shows the time it takes to settle complaints that are referred to the ombudsman service.

The proportion of cases we settled within nine months and within 12 months remained at similar levels to previous years. However, we were unable to settle as many cases as we wanted within our three-months and six-months targets, largely because of the impact of the legal challenge brought by the banks in relation to our approach to payment protection insurance (PPI) complaints.

This legal challenge gave rise to a number of issues that significantly affected our ability to deal with cases as promptly as we would have liked:

  • Publicity around the banks' legal challenge - and subsequent publicity and media campaigns throughout the year - have led to substantial increases in the number of new PPI cases referred to us. Following public consultation at the start of 2011, we had geared up to receive between 48,000 and 72,000 new PPI cases during the year - not the record 157,716 cases we actually received.
  • During the legal challenge we experienced less co-operation from some businesses than we would otherwise have expected. With businesses deciding not to respond substantively to many complaints until the legal outcome was known, this meant large numbers of cases were effectively put on hold - resulting in delays and uncertainty.
  • Following the High Court ruling - and the subsequent decision by the banks not to appeal - some major businesses struggled to catch up with their backlogs of complaints and had to apply to the regulator, the FSA, for special extensions to the normal complaints-handling deadlines.
  • As banks and financial businesses have rapidly expanded their operations to deal with the substantial volumes of PPI cases, the skills of our adjudicators made them very attractive on the recruitment market. We have found it challenging to compete with the remuneration packages offered by some businesses - and this led to significantly higher staff turnover. Having to recruit and train large numbers of new staff - both to replace our leavers and to gear up for our increased workload - has had a direct impact on our productivity and the timeliness of our complaints handling.
PPI cases awaiting resolution at 31 March 2012 %
waiting for less than 6 months 64
waiting between 6 months a year 23
waiting between a year and two years 11
waiting over two years 2

we are seeing businesses become less willing to concede and consumers become more demanding

We have continued to see businesses taking a more challenging - and in some areas, more legalistic - approach, not only in relation to PPI complaints but also to casework more generally.

For example, during the year an insurance company, Europ Assistance, launched a legal challenge (by way of a judicial review) against an ombudsman's decision on a travel-insurance complaint involving volcanic ash - following delays and disruption to travel caused by a volcanic eruption in Iceland in 2010.

This legal challenge meant that over 300 consumers' cases were held up for six months - until the High Court rejected the challenge in January 2012 and Europ Assistance said they would handle the cases in line with our approach.

In most areas of our work, we are seeing disputes involving hard-fought arguments and entrenched attitudes - on both sides - as businesses become less willing to concede and consumers become more demanding.

This resulted in an 18% increase during the year in the number of cases where an ombudsman issued a final decision as the last stage of our process.

We continue to prioritise cases where consumers might be disadvantaged by having to wait longer - for example, through financial hardship or for medical reasons. During the year we identified and prioritised over 10,000 cases where financial hardship was a significant issue. Around 4,000 of these cases related to overdrafts and loans - and more than 3,000 involved mortgages.

Of course, prioritising cases like these inevitably means that other complaints cannot be progressed as quickly as we would otherwise like.

knowledge and expertise

We believe that professionalism should be central to our approach - and that this professionalism depends on our adjudicators and ombudsmen having the right knowledge and expertise to do their work to the highest standards.

… knowledge and expertise are at the heart of everything we do

As part of our commitment to putting professionalism and quality at the heart of everything we do, we have:

  • Expanded our panel of ombudsmen, giving us the capacity to involve ombudsmen more actively in mentoring and developing our case-handling staff - and in the professional leadership of our service more widely.
  • Invested in a new training programme, externally accredited by Queen Margaret University, Edinburgh, that we will be introducing for all our adjudicators. The programme, set at Masters degree level, has been specially designed to build and maintain the professional skills of our case-handling staff.
  • Developed our "knowledge infrastructure" - with new tools to help give our staff the knowledge they need at the time they need it. In 2011 we won a national award for the innovative way in which we use online forums, blogs, chats and wikis on our in-house intranet - to encourage knowledge-sharing and collaborative working.
  • Launched our new professional career-structure that encourages and enables the growth and development of our case-handling staff - from the consultants on our consumer helpline through to our most senior ombudsmen.
  • Extended our "academy style" approach to training all newly-recruited adjudicators. This involves an intensive classroom induction for their first 12 weeks, before placing each new adjudicator in a team of experienced adjudicators for structured on-the-job training and mentoring.
  • Committed to a training and development programme for all our managers - with staff each having an average of nine days' training during the year.
  • Supported a "continuous improvement" framework to co-ordinate and organise the wide range of ideas and suggestions put forward by employees - aimed at delivering improvements for our customers.
  • Prioritised our internal communications - to engage everyone, and to maintain impetus and enthusiasm, as we introduce new ways of working and new changes such as electronic case-files.
  • Launched a series of customer videos for internal training purposes - to help us better understand, from the consumer's own perspective, how it feels to bring a complaint to the ombudsman service. This builds on the "customer experience" workshops that we developed last year - and have now built into our training programme for all case-handling staff.
  • Provided our staff with the skills to deal confidently and sensitively with an increasingly diverse range of customers, including those with different needs. We run a disability-awareness and customer-service programme in partnership with six disability, mental health and wellbeing charities. During the year we focused, in particular, on helping our staff interact with customers facing difficult issues involving loss and bereavement.


Quality is what matters most to our customers and stakeholders - and delivering a high-quality service is of fundamental importance to us. "Quality" means that in every case we should be able to show that we have:

  • Made the decision in the right way - getting to the heart of the issue and applying the approach we take consistently in similar cases.
  • Treated customers well - the consumer and the business in each case - so that they are satisfied with the level of service we have provided.
  • Got the basics right - for example, responding appropriately to different communication needs.

… quality means getting the basics right, treating customers well, and making decisions in the right way

During the year we reviewed the framework we have in place for measuring and reporting on quality and consistency issues. This included:

  • Involving ombudsmen far more proactively in reviewing and giving constructive feedback on the technical accuracy and consistency of adjudicators' work.
  • Developing a system to ensure that any case-specific feedback from customers is reported direct to the individual case-handler who worked on the case in question - and to their manager.
  • Looking at the role of the quality committee - a sub-committee of our board of non-executive directors - and ensuring that it was receiving the right level of management information to ensure strategic oversight of quality and customer-service issues.
  • Involving our senior management team and board members in an assessment of a cross-section of randomly-selected closed cases.
  • Introducing a consistent approach to measuring the quality of our customer service - reflecting aspects such as reliability and empathy that customers consistently tell us are important to their overall satisfaction.

stakeholder research

We carry out a programme of stakeholder and customer research - to help give us a closer understanding of what our customers think and feel, how they rate the service we provide, and where we could do things better. During the year this programme included:

  • Running monthly online surveys and six-monthly postal surveys to record and measure how consumers, whose complaints we have handled, rate various aspects of the service we provided.
  • Researching the issues covered and the language used across the internet in online conversations about financial problems and the ombudsman - to assess where it would be helpful and appropriate for us to increase our social media presence.
  • Filming consumers in their own homes, talking freely about how complaints in general - and using our service in particular - made them feel.
  • Surveying consumers online and over the phone, to find out their views on the possible implications for them of making ombudsman decisions publicly available.
  • Carrying out research to monitor the views of the businesses we cover - smaller businesses and larger ones alike - using both online and postal surveys.
  • Commissioning research among MPs to get their views on our work in relation to their constituents.
  • Monitoring general consumer-awareness of the ombudsman service, to help with our work on accessibility - ensuring that everyone who needs to contact us knows how to find us and how to access our service.
  • Running a survey for our website users, to find out more about who they are and why they use our website.

…we want a closer understanding of what our customers think and feel

Results and feedback from these stakeholder-research activities are shown in more detail in the chapters who complained to us and who the complaints were about.

handling complaints about us

Recognising where we have made mistakes - and learning from any shortcomings - is a vital part of our commitment to providing a first-rate customer service. 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.

We can usually sort out problems straightaway - as soon as someone tells us that they are unhappy with the standard of service they have received. The prompt involvement of the relevant manager - with an immediate phone call to apologise or explain - means we can resolve many issues without the problem escalating into a formal complaint.

But if we are not able to sort out matters at this stage to the satisfaction of the customer, one of our senior managers will look into the problem. This applies to complaints both from consumers and businesses. The process is entirely separate from the usual process that applies if a consumer or business disagrees with our views on the merits of their case - and wants us to re-consider facts and arguments.

In the financial year 2011/2012, we handled 2,382 complaints about our service. This was a 4% decrease compared with the 2,489 complaints we received in the previous year. We were able to resolve two thirds of these complaints directly within the teams where the problem arose - and a third of the complaints (805 of them) were settled with the involvement of a more senior manager.

Complaints about our service related to 0.9% of our total caseload (1.2% in the previous year). 5% of the complaints were made by businesses and the others were all from consumers or their representatives.

We upheld 37% of these complaints (33% in the previous year). Where this involved paying compensation - in recognition of the inconvenience caused by delays or administrative errors on our part - most payments were around £250.

Where we are unable to resolve a complaint about our service, it can be referred to the independent assessor - for a formal independent review of the level of service we have provided. Each year the independent assessor produces an annual report for our board, setting out findings and recommendations made over the year. We publish the independent assessor's report in full on our website.

improving our processes

We are committed to identifying and implementing changes to our processes that help improve the quality, consistency and efficiency of our work.

Many of the projects and initiatives aimed at delivering improvements for our customers are co-ordinated as part of our "continuous improvement" framework. Others are part of our major "change programme" which we launched in 2010 to transform and modernise all aspects of our operations, in the light of the rapid and unpredictable growth in demand for our services.

During the year, our progress on delivering this programme has included:

  • Starting to exchange the majority of case information electronically with some of the major banking groups - eliminating costly and cumbersome "bulk mail" processes.
  • Trialling document-scanning and electronic-file management, to help reduce our reliance on paper files.
  • Introducing centralised printing - as a faster and more efficient way of printing and enveloping letters.
  • Developing a new framework for recruiting a proportion of our adjudicators as contractors rather than as permanent staff.
  • Strengthening our operational planning capability - to help us forecast future workload and to run our "demand and capacity" function more efficiently.

… we need to adapt our processes to reflect both business and consumer needs

During the year we also launched an experimental casework project, testing out different ways of handling complaints involving e-money and payment transfers. New payment systems mean that consumers are interacting with financial services in very different ways - and are increasingly expecting to complain differently too, if something happens that they are not happy with.

This highlights the speed with which society, business and technology are evolving and transforming. We need to scrutinise our processes on an ongoing basis, to see how they might be adapted and updated to reflect both business and consumer needs.

As part of our programme of three-yearly external reviews, our board invited the National Audit Office (NAO) to carry out an independent review of our efficiency. We published the review in full in January 2012.

The NAO concluded that the key efficiency challenges facing us included our having to cope with volatile demand - such as the large surges of so-called "mass claims" like bank charges and PPI - and the way in which financial businesses themselves deal with customer complaints.

The NAO also noted that the programme of changes introduced in 2010 to modernise our operational processes and IT (including our "e-enablement" project) had already begun to realise benefits - and while some aspects of project management should be strengthened, the programme was being managed well with good progress made to date.

our budget and funding

We are 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.

In the financial year 2011/2012 we did not charge businesses case fees for the first three disputes involving them. Businesses were charged case fees only for the fourth (and any subsequent) dispute during the year.

Our budget is calculated on the basis of workload forecasts that we consult on publicly each year through January and February - before the start of the new financial year.

Following public consultation in January and February 2011, the boards of the FSA and the Financial Ombudsman Service approved a balanced budget for the ombudsman service - for the financial year 2011/2012 - that assumed both income and expenditure would be £102.9 million, with a unit cost of £571. 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.

our unit cost

year ended
31 March
our unit cost (£)
2012 484
2011 639
2010 555
2009 508
2008 529

The actual final figures for the year showed total income of £125.5 million, expenditure of £107.5 million, and a unit cost of £484. These were significantly different from the figures that had been anticipated at the start of the year, reflecting the operational volatilities we experienced during the year.

For example, we had expected to be able to complete and close between 60,000 and 84,000 payment protection insurance (PPI) cases during the year. But this number rose to 117,806, because in the second quarter of the year we were able to resolve a much larger number of PPI cases than expected - as businesses agreed to settle, without challenge, many complaints that had been held up by the judicial review.

However, we saw the costs of dealing with PPI cases rising steadily - as the high volumes of new complaints showed little sign of abating, and as businesses and claims-management companies became less willing to settle cases at an early informal stage. This meant we started to see increased numbers of entrenched disputes requiring detailed investigation and analysis.

This is a trend we expect to continue into the future - and we have proposed changes to our charging structure from 2012/2013, to reflect the rising costs of dealing with our increasingly complex and challenging PPI caseload.

… we reduced our underlying cost base by 10%

In spite of these volatilities, we were still able to deliver the cost-cutting programme to which we had committed during the year. This involved reducing our underlying cost base by 10% through a range of measures, including re-negotiating contracts, strengthening our procurement capability, internal restructuring, and introducing a new framework for managing our contractors.

As part of the NAO's review of our efficiency this year, it identified that while the total costs of settling disputes at the ombudsman service had risen by 214% in real terms since 2001, the complaints workload we have handled over this period had increased by 376%.

our income and expenditure

our income and expenditure (summary) actual
year ended
31 March
£ m
year ended
31 March
£ m
year ended
31 March
£ m
year ended
31 March
annual levy 22.6 20.5 20.9 20.6
case fees 102.5 82.2 77.1 77.6
other income 0.4 0.2 0.3 0.2
total income 125.5 102.9 98.3 98.4
staff-related costs 84.2 84.2 88.8 78.3
other costs 21.1 16.6 15.0 12.3
financing charges 0.0 0.0 0.0 0.0
depreciation 2.2 2.1 2.1 1.8
total expenditure 107.5 102.9 105.9 92.4
surplus/(deficit) 18.0 0.0 (7.6) 6.0

These figures are drawn from our unaudited management accounts. The directors' reports and audited financial statements are available separately on our website and as hard-copy from July 2012.