The FSA's handbook imposes a fairly strict regime for complaints handling. This revolves around 'eligible complainants', those who are able to bring a complaint to the Financial Ombudsman Service (FOS). An eligible complainant is:
A private individual A business that has a group annual turnover of less than £1m A charity that has an annual income of less than £1m A trustee of a trust that has a net asset value of less than £1.Eligible complainants need not be actual customers of the firm: among various categories listed by the FSA are persons for whom the benefit of a contract of insurance is intended. For example, an employer might purchase a group permanent health policy for the benefit of its employees. Although the employer may not be eligible, employees whose claims are rejected or poorly handled are eligible complainants as the insurance was bought for their benefit.Firms must have an effective internal complaints procedure covering complaints by eligible complainants and this procedure must be recorded in writing.A number of steps are required to be taken by stipulated time limits. This procedure must be advertised to clients on the point of sale. Firms must beware: while many retail customers will be eligible complainants and many eligible complainants will be retail customers, there will be exceptions on both sides. Firms may make their internal complaints procedures available to retail customers who are not eligible complainants, but must take care to ensure that those commercial customers who are eligible complainants are not overlooked.If the firm is unable to resolve the complaint using its internal procedure and the complainant refers the matter to the FOS, the FOS will send the firm a copy of the complaint form and request that the firm comment. The FOS operates on an inquisitorial basis. This means that if the FOS does not understand the complainant's complaint, rather than dismiss it out of hand it will ask for more information from either the complainant or the firm. As a respondent, the firm must be alive to the fact that the FOS may go beyond the specific complaints and look at the wider picture. This was typified by the R (Green Denman) v Financial Ombudsman Service [2003] case, which related to the poor advice on a personal pension plan, in which the court held that it was reasonable for the FOS to rule on matters outside the subject matter of the original complaint and that the firm should have looked at the substance of the complaint rather than the way in which it was formulated.The FOS may also approach cases in novel ways. In one case the FOS decided that the ABI Statement of General Practice should apply to a small business, even though strictly speaking the statement is only intended to apply to "non-commercial" policies. It therefore held that a claim could not be repudiated for delay because there had been no prejudice to insurers despite late notification. The rationale for the decision was that as the complainant was a sole trader, he was effectively in the same position as a "non-commercial" assured. The FOS may have been influenced in this decision by the modest size of the assured's business and might not have been so lenient if the assured had been a business with a turnover approaching the limit of eligibility.In a second case the FOS decided that damage to an external TV aerial was covered by a buildings policy, even though both standard industry practice and the practice of the insurer involved was to treat aerials as contents. Here the rationale was that most individuals would regard aerials as part of the structure of buildings because they are not readily removable and because they are far more likely to be damaged by the types of insured event that affect the structure of buildings (such as storm damage) than those that might damage contents (such as theft or domestic flooding).Brokers should therefore take care to ensure that:
They have a written complaints procedure All potential eligible complainants are made aware of this procedure at the point of sale The procedure is actually used If a complaint is made to the FOS any response actively covers all the circumstances rather than just the points made in the actual complaint. Even if they do this, there may be a few nasty surprises in store. However, brokers may take some comfort from the fact that from 1 April 2004, the first two complaints in any one year will be considered by the FOS free of charge.
Harriet Quiney is a senior solicitor with Reynolds Porter Chamberlain
