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annual review 2013/2014

1 April 2013 to 31 March 2014

chief ombudsman's report

It’s always going to be a challenge for any organisation to deal with a doubling of demand for its services over a short period of time. But anyone who is familiar with our service and previous annual reviews will know that for the last two years or so, we have been dealing with precisely this challenge.

We’ve spent this time scaling up our operation and adapting the way we work - to handle both the unprecedented volumes of complaints and the volatility in the types of cases consumers have been referring to us. And we have made significant progress in doing so. This year it's been less a question of our bracing ourselves for the challenges ahead, and more one of meeting them head-on.

During the year covered by this annual review - 2013/2014 - we have resolved a record number of cases. We have given over half a million people honest answers to their complaints. That is a reassuring indication that our operational plans are sound - and that the work of the last few years is paying off.

I am pleased to say that the tide of complaints about payment protection insurance (PPI) finally seems to be turning. But we know how many unresolved cases we still have on our books. And we have been very open about the reality that we are certainly not out of the PPI woods yet.

In spite of all these challenges, I am enormously proud of the fact that we have stayed true to our original ombudsman purpose and values, even though we have had to change - and change rapidly. We exist not only to resolve individual disputes. One of the most valuable functions of any ombudsman scheme is to share what it is seeing - to help make things better in the future. We are uniquely placed to see what is important to customers when they are using financial services. We see what they expect - and we see what happens when those expectations are not being met.

So it is important to share our observations with our stakeholders. But anecdotal evidence can be misleading. It would be all too easy to assume that what we saw in one particular case is evidence of a more widespread problem. It might be, but it might not. Our job is to turn observations into insight. And to do that, we need to gather intelligence from across all our casework teams, and make sense of what it’s telling us.

This means having to think laterally. We have to move away from artificial divisions imposed by old processes - those of financial businesses and our own - for handling complaints. So if, for example, we see problems involving sales, or over-complex terms, or administrative failings in one particular product area, we need to think carefully about what we can learn from these business-consumer interactions that might also help prevent problems elsewhere.

This is something we have been working towards for a long time. Fourteen years ago, the ombudsman started out as a “private” service. We didn’t comment in public on the individual cases we handled. But not long after we were established, we started to open up. We began publishing data on the complaints that were coming to us. Then we started sharing our general approach to particular types of cases. And this year we started publishing each individual decision our ombudsmen make.

But simply publishing individual cases won’t always be enough to make improvement happen. We also need to develop thoughtful, qualitative insights based on the quantitative data we are seeing - and to share this with the wider world. This is where the true value of an ombudsman scheme lies - and it’s something we have started doing more during the year covered by this annual review.

A few years ago we developed a set of principles for how we want our service to work. We are still committed to each of those principles, and I will use them as a framework to reflect on our performance during the year.

delivering a trusted, fair and easy to use service

Trust will always underpin the work we do. Our “product” isn’t something tangible. It’s about making judgements based on the evidence and the facts available to us. So if people didn’t trust our judgement, our role as an ombudsman would be seriously undermined.

During the year, our stakeholders in financial businesses reported increasingly high levels of confidence in the ombudsman service. Three quarters of frontline complaints handlers across all businesses said the financial services sector could have confidence in us. 57% of managers in those businesses said the same - up 19% on last year. This is very encouraging indeed.

Turning to consumers, we know from our face-to-face conversations with thousands of people - at events ranging from independent living exhibitions to student advice fairs - that not everyone understands our role. Some people we meet think we’re the regulator - asking “how can you let them get away with it?” On the other hand, some people think we’re a consumer champion - saying “we need someone like you to stand up for us”. It’s important that we work to try and clarify any misconceptions about who we are - and what our role is - from the outset. Trust can only be built on a clear understanding of what to expect.

Despite these tensions, I’m pleased to say that during the year 70% of adults across the UK said they would trust us. And 80% of people whose complaints we handled said they would recommend us to friends and family - even where we hadn’t made a decision in their own favour. This is a positive sign that people recognise that we are giving honest answers to their problems.

But we certainly can’t afford to be complacent. We know there are many consumers out there who might need our services, but who are not getting in touch with us. During the year our research suggested - once again - that someone’s age, socio-economic status and ethnic background can all affect how likely they are to use the ombudsman.

Mindful of this, we have put more time and effort than ever into getting out into local communities and working with particular groups of people - at “melas”, roadshows and other events. We’ve met people in cinema foyers, supermarkets and football grounds - to hear what they think about the ombudsman. We’ve worked with regional media and joined forces with local MPs and community leaders to get our messages out across the length and breadth of the UK - including some of the most geographically remote parts.

We also know that people who are experiencing financial hardship might be less likely to come to us with a problem. These people are often trapped in a cycle of debt and might not be sure how to get out of it. Many might not want to admit that they’re having problems. The case study "at breaking point" in the complaints we received, shows just how much we were able to help someone in this position.

We might not be the first organisation that springs to mind when it comes to helping people through difficult situations like this. But we often find that our approach - listening to problems, talking things through informally, and looking for pragmatic solutions - lends itself to coming up with a way forward that both the consumer and the business are satisfied with. As this particular case study shows, the effect on people’s lives can be profound.

During the year we continued to put a lot of effort into building partnerships with frontline advice workers and charities - locally and nationally - to reach people who might need us. This has included inviting a wide range of charities and support organisations to meet our staff and talk about how we can help people with different needs.

This has involved finding out how we can make ourselves easier to use and more approachable for people who might lack confidence in dealing with “institutions”.

During the year we have also made far more use of social media - having conversations with people in the open and tweeting “real time” trends from our consumer helpline. This is another way of reaching people who might not otherwise be aware of us or comfortable engaging with us.

As this annual review shows, we continue to keep a close eye on who is and who isn’t using the ombudsman. This will help us make the best use of our resources in the future - and continue to make ours a service for everyone.

sharing our insight and experience - to help build confidence

Earlier in this report I mentioned our determination to share what we see with the financial services sector. Every ombudsman scheme - whatever its remit - should take responsibility for helping to improve complaints handling. We have had another busy year meeting businesses - from the smallest consumer credit provider to the largest high street bank - to share our insight and experience.

Discussing issues face-to-face can be particularly helpful in the “prevention” side of our role. During the year we have hosted more events than ever for smaller businesses - from Glasgow to Bournemouth, and Belfast to Norwich - to help them get to grips with the ombudsman’s role, our approach to complaints, and what to do if they have a complaint referred to us.

Of course, we also continue to work closely with larger businesses. Many of these businesses are more familiar with us - simply because they have significantly more customer complaints referred to us. We have arrangements in place both at an operational and a strategic level to make sure we are sharing insight and experience with these businesses.

This includes talking about the issues we are seeing and, where relevant, working with the businesses involved to find an efficient way of settling large numbers of complaints involving similar issues.

But not everything can be done face-to-face. During the year, we have continued to increase the number of resources we have available on our website - to help complaints handlers understand how we might approach particular types of cases. We have published updated guidance on a wide range of product areas - from pet insurance to portfolio management. Particularly relevant to early 2014, we also updated our online technical guide on disputes involving storm damage and flooding.

We have continued to publish illustrative case studies in ombudsman news - and during the year 70% of readers said that what they’d read had influenced the way they approached complaints. And we have been publishing our ombudsmen’s individual decisions for 12 months - as another way of shedding light on our approach to the cases we see.

During the year our advice desk - our free helpline for businesses and advice workers - received over 24,000 calls. Our team on the advice desk is there to explain how the ombudsman might approach a particular complaint. During the year they helped people deal with problems - like the ones we highlight "our advice work" in the chapter "other work we have done" of this annual review - without the need for us to get involved.

The new regulator for the financial services sector, the Financial Conduct Authority (FCA), has now been up and running for over a year. We have maintained a close working relationship with the regulator. We have kept the FCA abreast of emerging issues that we have come across, as well as where we have seen individual examples of poor practice.

We also worked with the Office of Fair Trading (OFT) on changes to the way that consumer credit is regulated. This involved the transfer of responsibility for the regulation of consumer credit from the OFT to the FCA from April 2014. And we have shared our insight into the activities of claims-management companies with the Ministry of Justice and the Legal Ombudsman.

I am determined to make sure we find more ways of sharing our insight - and increasing its impact - over the coming year.

putting knowledge and expertise at the heart of everything we do

Once again, training and developing our staff has been a high priority for us during the year. With many new ombudsmen and adjudicators joining us - and with a high proportion of relatively new staff - we have provided extensive training to make sure that people have the necessary skills and knowledge to handle cases to the high standards we expect.

We have focused on building people’s professionalism - with our ombudsmen as mentors and coaches at the heart of our professional leadership. We have also been re-thinking our approach to “knowledge management” - for example, by introducing “knowledge communities” led by our most experienced members of staff.

We recognise how important it is that our staff should feel stretched and challenged - with their talents nurtured and developed. We also know that there is growing demand for experienced complaints handlers across many sectors. So it’s inevitable that some of our staff may decide to develop their careers outside the ombudsman service.

During the year, however, we have been able to retain people as we had hoped to and grow as an organisation to meet the challenges described in this review. We were once again recognised as a “Top 100” organisation to work for in the Sunday Times Best Companies survey. Keeping an engaged and enthusiastic workforce helps us deliver the fair and consistent outcomes that our customers rely on.

being flexible, reliable and effective

Ours is a demand-led service. So although we consult widely on our plans and assumptions, forecasting and planning for demand is very difficult. We also see a high degree of volatility in the types of cases referred to us. So we have to work flexibly, and be ready to deal effectively with whatever we are called on to do.

The number of PPI cases we received during the year far exceeded our - and our stakeholders’ - expectations. But the time and effort we have put into scaling up our operation over the last few years has begun to pay dividends. We began the year well placed to deal with growing demand. And we have made significant inroads into our caseload - resolving a record 389,730 PPI cases during the year.

But PPI isn’t the whole story. During the year, for example, we have seen a substantial increase in cases about “packaged” bank accounts and significantly fewer cases about portfolio management. This means we need to be flexible in the way we manage our caseload, so that every case we deal with is handled professionally and to the highest standards.

We are fortunate to have a strong team of professional leaders - our ombudsmen - who help make it possible for us to combine flexibility and rigour with pace and precision.

I mentioned earlier in this report that our service is well placed to see the wider “cross-cutting” issues and trends in the complaints referred to us. But to be ready for future cases, we also need to be able to anticipate what might be around the next corner. So during the year we have strengthened our “horizon-scanning” capability - to be able to identify new issues quickly and respond effectively to changes in the volumes and types of cases referred to us. This in turn helps us make sure that we have the resources we need to deal with these changes - and that we know where and how to deploy them.

Although I am pleased to see from our surveys and research that businesses and consumers are broadly satisfied with the service we provide, I recognise that our timeliness is something we need to improve. We know that people want their complaints resolved as quickly as possible, and many are still waiting far longer than I would like. I am determined to improve our ability to resolve complaints more quickly - and just as effectively - over the coming year.

operating an efficient infrastructure

We are funded by the businesses we cover, and we fully appreciate that they rightly expect value for money. In April 2013 we introduced new group-account funding arrangements for the four largest financial services groups - reflecting the fact that together they accounted for some 60% of our caseload.

This new arrangement helped ensure that we received our income in a timely and stable way during the year - enabling us to adjust our resources to respond to volatility in demand. The four groups involved welcomed the transparency of the new arrangements - and recognised that it brought lower administrative overheads and increased efficiency. We have now agreed to extend these arrangements to a further four financial groups for the 2014/2015 financial year.

The unit cost of our service has been rising in recent years, as we have geared up our resources in response to the doubling of our workload. However, in 2013/2014 our unit cost fell. This was a result of the investment we have made in a larger workforce that is now making significant inroads into our stock of cases. However, we know from our experience of dealing with similar large-scale disputes - for example, mis-sold mortgage endowments in the mid-2000s - that the PPI cases we are dealing with are likely to become increasingly complex and entrenched over the next few years. This is likely to have implications for our unit cost in the future.

During the year we have achieved our aim of handling the vast majority of cases electronically. We have introduced document scanning and electronic-file management across our entire casework operation. This enabled us, for example, to quickly sort out complaints from consumers whose problems had been caused by IT glitches at their bank during the year.

Over the coming year we will be working hard to identify more ways in which we can work differently and more efficiently - to provide value for money to the businesses who fund us, and better customer service for those whose complaints we handle.

remembering what matters

This annual review is full of data. In a few months’ time we will publish a directors’ report, which contains yet more information about the way we run our service. And throughout the year just gone, we have published still more statistics about the trends we have been seeing in product areas, and about the businesses involved in those complaints.

But I come back to where I began this report. Quantitative data is useful - and can tell us a great deal about what’s going on when consumers and financial businesses interact. It is vital that we all understand the trends, and what they might mean.

But as well as looking for the numbers - perhaps comparing and contrasting with last year - I urge you to look at the words in this annual review. You will find several case studies that are striking reminders of why the ombudsman is here. We include these to bring us back to the reality of the day-to-day work we do - and the people involved.

The ombudsman’s job is to make evidence-based decisions. Our decisions about how we run the organisation, what we prioritise, how we develop and improve, must also be based on evidence. Seeing the year set out in this annual review helps us make those decisions for the future.

Looking back at 2013/2014, I believe that everyone at the ombudsman can be proud of the progress we have made. We still have a long way to go. But I’m confident that we are equipped to make even more progress over the coming year - not only in resolving record levels of cases, but also helping businesses and their customers re-establish the trust that underpins a successful financial services sector.

Tony Boorman
May 2014