Customers will remember poor service after the recession

Customer service has nosedived and companies showing “weary cynicism” are dismissing complaints out of hand, leaving the ombudsman as the “emotional shock absorber”, The Financial Ombudsman Service’s (FOS) Walter Merricks has warned.

“The way some businesses are handling these complaints suggests that a weary cynicism is setting in. Some in the financial services industry – currently facing significant business challenges – appear to be taking the jaundiced view that having a large number of complaining customers is just an unfortunate fact of life. So they seem to be geared up simply to dispose of complaints at minimum cost – and with minimal attention to the individual facts and circumstances.

“Inevitably, when some of these consumers then turn to us, they feel angry, ignored and let down by the financial institutions they have dealt with. And we find ourselves having to play the part of emotional shock absorbers.

He warned cases may not even be properly looked through until it reaches the ombudsman service.

Insurers may be ignoring complaints deliberately. FOS researched found that almost half of consumers who had an unresolved complaint against a financial business were deterred from pursuing it further by the fact that the business had such an unhelpful approach.

But Merricks said customer service would win new customers whenthe economy turned around. “When markets pick up and these same businesses look to attract new customers, they may well discover that consumers have long memories of how well – or otherwise – they were treated in the past,” he said

The report included several examples of travel insurance claims upheld against insurers. These include:

  • Insurer refused to pay out as one of those covered did not live in the UK. Ombudsman ruled that information had not been asked or explained at the time the policy was sold by the travel agent.
  • Cancellation not covered because insurer advised policyholder not to take out annual policy until the date of the start of holiday. Ombudsman ruled insurer at fault.
  • Insurer refused to pay when policyholder developed a chest infection a week after denying any illness likely to lead to cancellation. Ombudsman ruled that having a “mild cough” was not a significant enough illness to report and upheld the complaint.
  • Insurer of pre-existing condition top-up cover (cost £200) took the money but said policy was invalid without buying the base cover from them too. Ombudsman said insurers should not be “accepting premiums where it does not provide any valid cover”.