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Plan & Budget 2001 / 02 for the year ending 31 March 2002 - chapter three

business plans - "preparing to launch the new unified ombudsman service at 'N2' "

Background and objectives

1 The past year has been one of design and construction, as we put in place the elements for operating the new single ombudsman service. At some point during the year 2001/02 (the date commonly called 'N2') we expect to receive our full statutory powers under the Financial Services and Markets Act and and will move from being a 'shadow' organisation to a full service.

2 Our longer term objectives, which we set out in our first annual report, are to:

  • provide consumers with a free one-stop service for dealing with disputes about financial services.
  • resolve disputes quickly and with minimum formality.
  • offer user-friendly information as well as adjudication, and promote avoidance of disputes as well as their resolution.
  • take decisions which are consistent, fair and reasonable.
  • be cost effective and efficient, and be seen as good value.
  • be accessible to disadvantaged and vulnerable people.
  • be forward looking, adaptable and flexible, making effective use of new technology.
  • be trusted and respected by consumers, the industry and other interested parties.

3 In this brief chapter we summarise the work being undertaken on behalf of the existing schemes until 'N2', and the preparatory work for the new ombudsman service.


Overview of services provided under the service level agreements with the existing scheme boards

4 In March 2000, the Financial Ombudsman Service signed 'service level agreements' with the boards of the existing complaints-handling and ombudsman schemes. Under these agreements, the Financial Ombudsman Service undertook to provide the appropriate complaints-handling service on behalf of each of the existing boards from 1 April 2000 until the Financial Services and Markets Act comes into force - at which time the Financial Ombudsman Service will assume full responsibility.

5 We have structured the new single service into four principal areas - a customer contact division (screening customers' initial contact with the ombudsman service) and three casework divisions for insurance, investment, and banking and loans. These divisions carry out work on behalf of the existing schemes, but will also work in the same structure following 'N2'. A brief summary of the work of the divisions is set out below.

6 The customer contact division This division is involved at the initial stages of the ombudsman process, acting as a gateway to the complaints-handling and dispute resolution service. The division currently receives around 5,000 phone calls and 1,000 written enquiries each week.

7 The insurance division This division services the work formerly carried out by the Insurance Ombudsman Bureau (IOB). Nearly two thirds of complaints relate to household and motor policies, but complaints are also made about all types of personal insurance - travel, medical expenses, loan protection, legal expenses etc.

8 The banking and loans division This division resolves consumers' disputes with banks and building societies, servicing the work of the separate Banking and Building Societies Ombudsman schemes. Complaints fall broadly into two areas - complaints about investment accounts, payment accounts, current accounts and card services; and complaints about mortgages, overdrafts and other loans.

9 The investment division This division carries out work principally on behalf of the Personal Investment Authority (PIA) Ombudsman Bureau. Most of the complaints dealt with by the investment division relate to advice given to consumers to buy investments. These cases generally involve having to decide whether the details of the investments were properly explained and whether the investment in question was suitable, given the consumer's personal and financial circumstances.

10 New cases in this area have risen by 50% over 1999/2000 - principally due to the increase in complaints about mortgage endowments - and there is a further projected increase of over 20% in 2001/02. This has clearly put a strain on the division's resources and we are recruiting and re-organising to cope with this workload.

11 The investment division is also responsible for the work carried out by the Office of the Investment Ombudsman (which deals with complaints about firms regulated by IMRO) and the Securities and Futures Authority Complaints Bureau.

12 A summary of the workload estimates for each of the schemes is set out in chapter 4.


Building for the new scheme

13 In parallel with servicing the business of the existing schemes, we are preparing to launch the new unified ombudsman service at 'N2'. In our annual report to March 2000, we set out progress to date. In summary:

  • In April 2000 we brought the schemes together in one location in South Quay, East London.
  • Of the 340 existing scheme employees, we succeeded in attracting 315 to join the new service.
  • We have invested heavily in resources and skills, in particular introducing a new IT infrastructure.
  • We have developed an extensive training and performance management programme. In the nine months to January 2001, we have undertaken a total of over 2000 days of training.

14 Our priorities over the next 12 months, in preparing for the new service, are:

  • Developing the policy and practices of the new service.
  • Determining the method of funding the new service.
  • Implementing the new business process.
  • Introducing a new unified case handling computer system.
  • Increasing training in professional and management skills. The work in each of these areas is summarised below.

15 Policy and practice Work is progressing on all the policy areas in preparation for 'N2'. This includes:

  • Developing the rules of the new service. The final rules are set out in a joint FSA and Financial Ombudsman Service policy statement published in December 2000.
  • Our practice in relation to the Human Rights Act.
  • Preparation for the introduction of the 'voluntary' jurisdiction after 'N2'.
  • Development of 'best practice' in relation to quality control and monitoring of decisions.
  • Liaison on the proposed changes with industry, consumer bodies and the public.

16 Funding the new service The FSA and Financial Ombudsman Service have recently published a joint consultation paper (CP 74) on the funding of the new single ombudsman service. This sets out for discussion the proposed basis of funding for the new service. The paper recommends that, initially, 50% of the funds are raised through industry levies and 50% through case fees. We arrived at these proposals with the help of a representative group from the financial services industry, the Industry Funding Group, and we hope to receive the group's continued help over the next few months as we consider responses to the consultation paper.

17 Since 'N2' is expected to happen mid-way through the budget year 2001/02, we will need to raise the 2001/02 budget through the funding mechanisms of the existing ombudsman schemes. The new approach to funding is expected to come into operation from 1 April 2002. Chapter 7 sets out the suggested allocation between existing schemes for 2001/02.

18 Implementing the new business process A key element of bringing together the ombudsman schemes is to develop a unified business process. In June 2000, a cross-divisional working group was set up to develop this process. The new design was approved in November 2000 and we are now developing detailed operational manuals.

19 A key principle of the new process is to ensure disputes are dealt with - and resolved - at the earliest possible stage and in a fair and cost effective manner. We will be attempting to avoid delay to the consumer and, where possible, cost to the firm. In order to achieve this, the customer contact division, which handles the initial contact with the consumer and the firm, will develop more pro-active screening measures. When cases subsequently progress to the casework divisions, we will attempt to mediate an agreed settlement before undertaking a full investigation.

20 Introducing a new casework software system To support the new business process, we have purchased a new casework software system which is being tailored to our specific needs. The project is well underway and we intend that all divisions will be using the new system by the summer of 2001. The system will need to be upgraded and refined during the remaining period of 2001/02. This is a major project which will include scanning and document management. It should provide a sound basis for the organisation to provide an efficient and cost effective service.

21 We will also need to develop our dispute resolution system to support new ways of working. As London office space becomes increasingly expensive, we intend to introduce home-working on a more systematic basis. This will need to be supported by the appropriate systems. We also plan to work with firms and consumer organisations to see how we can reduce the amount of paper in the complaints system. The new casework system will include the facility for electronic data transmission and will therefore help to reduce future costs to the industry.

22 Finally, we will need to underpin the entire development with a fully integrated 'knowledge management' system. This will aid consistency and assist the earlier resolution of complaints.

23 Training and professional development The move to a unified organisation with new systems and ways of working has created a huge challenge for all staff. In the current year, we expect to have undertaken a total of 2000 days of training, covering technology, appraisal and performance management and other skills. In the budget year 2001/02, we expect to continue training at the same level, with a particular focus on the roll-out of the new business process and supporting casework system.

24 We have highlighted a few key areas in this chapter. The key task has been to keep the level of productivity to at least that of the existing schemes, while at the same time preparing the single organisation for its new responsibilities. This has been carried out at a time when the number of new complaints has been increasing rapidly, as shown in the following chapter.