The adage ‘customer is king’ is not always adopted in practice, if complaints statistics are anything to go by. Lauren MacGillivray outlines the procedural pitfalls, and the solutions

Brokers can pat themselves on the back when it comes to their complaints record, with the annual Financial Ombudsman Service (FOS) review revealing that only 5% of all complaints received were against general insurance intermediaries.

In the period 1 April 2008 to 31 March 2009, the FOS fielded a total of 127,471 complaints. The majority were directed at banks, which received 59%. General insurers were the second biggest offender, responsible for 13% of complaints, posting a worse record than life insurance and investment product providers, which had 11%.

Another report by the FOS for the six-month period from January to June 2009 shows the ombudsman received a total of 69,841 new complaints. Five banking groups each had more than 3,000 complaints, which together accounted for 38,286 cases – more than half of all the new complaints.

For the FOS financial year, general insurance brokers only accounted for 5% of the complaints, and that percentage has remained steady. But this equates to 6,373 complaints, and ranks them fourth on the offender list.

Getting it right

In the age of treating customers fairly, brokers need to ensure they handle complaints in a way that protects their business, and keeps their clients happy.

There’s also a financial incentive. Obviously, the fewer complaints you receive the better. But in the case of the FOS, you get four strikes before you’re out of pocket: businesses are not charged for case fees for the first three complaints in the financial year. In 2008/09, 75% of businesses had fewer than four complaints brought to the FOS.

Consumers and brokers both have rights in the complaints process. If a consumer contacts the FOS before consulting the broker, the FOS will simply provide them with general advice and guidance, and then refer the complaint to the broker. If the broker can resolve the complaint at that point, then the FOS has no further involvement in the case.

But if the broker has already sent the consumer their final response and the consumer remains dissatisfied, or if the broker has still not sent a final response after eight weeks, then the FOS can look into the complaint.

While brokers are generally in the FOS’s good books, it’s worth remembering several recent reports. In September, the FSA for the first time published figures on the number of complaints regulated firms had received. The data, which covered 2006-2008, showed that complaints had increased by 5.7%.

In the category of general and pure protection insurance, misleading advice was the biggest reported issue at 25%.

Meanwhile, a recent joint report by Ernst & Young and the Chartered Insurance Institute says that brokers and insurers are failing to deliver “world-class service” to the mid-corporate commercial market.

The report says: “… little consideration has been given to the end-to-end value or service chain. Rather the focus has been on individual portions or elements. This has led to large degrees of duplication with no obvious improvement in industry efficiency. If anything, as everybody compensates for each other’s shortcomings, customer service may have worsened.”

With this in mind, the FSA and FOS have been stepping up their efforts to ensure that brokers and other providers of financial services are fulfilling their obligations to customers.

The FOS is calling for more businesses to use it as a resource, and is asking brokers to call in for advice throughout the complaints process.

“If you have any questions, then contact the ombudsman service and let them know,” a spokesman says. “The FOS has a range of resources for smaller businesses, such as its technical advice desk, which can give informal guidance on a specific problem or provide information on their processes or procedures. You may also want to refer to our guide for smaller businesses and the relevant section of the FSA rules.”

Both the FSA?and FOS?publish guidance online. For the FOS small business guide, visit: For the FSA’s complaints rules, visit:

At a time when businesses can least afford damage to their reputation and customer base, not to mention incurring FOS case fees, preventative measures are vital. Those firms that take advantage of the resources and support available, and implement an effective complaints-handling procedure (see box), may find that happier customers also mean a happier balance sheet. IT

Ten steps to resolving a customer complaint

  • Stop a complaint from escalating: Do not get defensive and take it personally; instead, listen to what your customer has to say. This might settle things at an early stage.
  • Pick up the phone: Speak with your customer and try to understand the issue quickly. Use this opportunity to apologise. You don't have to agree with the consumer's underlying complaint, but you can still say you are sorry that they're unhappy. Carefully and clearly explain any offer you are making to put things right. Be open in acknowledging any mistakes that may have happened.
  • Remember to follow up and respond to the consumer in writing: Send a prompt written acknowledgement (if you have not been able to resolve the complaint on the spot, or by the end of the next working day) confirming that you have received the complaint and will be dealing with it.
  • Finalise your response within eight weeks: Send the consumer a final response no later than eight weeks after your business received the complaint. This response should summarise the complaint, set out your investigation, and provide details of any offer with a clear explanation of how you reached that offer. It should also tell the consumer that they have the right to refer the complaint to the ombudsman within six months of your final response. You must enclose a copy of the leaflet, “Your Complaint and the Ombudsman”.
  • Ensure all relevant employees are aware of – and follow – the complaints-handling procedure: In addition, your procedure should be accessible for all customers, including those with disabilities.
  • Explain any delays: If exceptional circumstances mean you are unable to send the consumer your final response within eight weeks, then you must write to the consumer explaining why. Let them know they may now refer the complaint to the FOS, including a copy of the ombudsman’s leaflet.
  • File copies to the ombudsman: Once a complaint is referred to the FOS, send them a copy of all relevant papers unless the originals are specifically required.
  • Meet the deadlines: Make sure you meet the ombudsman’s deadlines for providing information. If you can’t do this, let the FOS know as soon as possible.
  • Inform your customer: Ensure the customer is reasonably informed about the progress of their complaint. If you keep them in the dark, they might get more upset.
  • Don’t hold back: Don’t keep back information as a “trump card” in case you think you will need it later. This just means the case will take more time to resolve.