The introduction of the ABI Claims Code and the FSA's rules on complaints handling procedures are designed to make life easier for the unhappy customer. Alison Boyle reports

Tony Peters had a bad day. He was picking up his children from school as on any other day. Parking in a busy street with the door shut but the keys in the ignition, he went to speak to his son who was about eight feet behind the car when suddenly two youths ran up, jumped into the car and drove off. The youths were involved in an accident and the policyholder's car was a total write-off.

To add insult to injury, the insurer refused payment on the grounds that the policy excluded claims for theft if the car had been left unattended or unoccupied, or if the keys had been left in it.

Peters was faced with two choices; either to accept the decision and be bitter, or complain.

This fictional example is similar to a recent case presented to the Insurance Ombudsman, the independent complaints bureau for the insurance industry. There the policyholder did chose to complain, and the Ombudsman interpreted the exclusions as removing theft cover only when the car driver has clearly gone away from the vehicle.

Complaints have recently become a watchword, and a host of trade associations and bodies have published guidelines on complaints handling. The most recent is the ABI General Insurance Claims Code, launched at the beginning of this year.

The code sets out the standards of service that insureds can expect when making a claim. At its launch, Mary Francis, director general of the ABI said: "It is an essential part of the ombudsman approach that individual companies have effective complaints procedures of their own. Customers must have confidence that they can get their problem looked at fully and fairly by the company, before there is any question of approaching the Ombudsman."

The Claims Code will be closely followed by the launch of the GISC rulebook in April, which will give the GISC the power to investigate claims from private customers.

This has prompted fears that policyholders will be confused about which way to turn when they have a complaint against an insurer.

The ABI though has been quick to point out that, as it is a trade association, not a regulator, its code is designed to complement the GISC standards and not to compete with them.

Spokeswoman Suzanne Moore believes the Claims Code and the GISC can exist happily side by side. "The Claims Code is current practice for handling complaints in the claims process, whereas GISC is more about standards in selling. There are many codes and standards flying around, but the Claims Code is not just a piece of paper, it will set a minimum standard that all ABI members will have to meet. If there is a persistent problem with some companies we will advise them on putting things right."

She hopes the Code will have wider implications, as the Ombudsman will see it as current practice in handling complaints and take it into account when dealing with non-ABI members.

A level playing field
Most insurers are positive about the introduction of the Claims Code. Harry Rule, claims manager for Allianz Cornhill, believes that most insurers would be meeting the measures anyway. "I hope that what it will do is is make our staff more forthcoming when dealing with complaints," he says. "There are no sanctions for non-compliance, as this is something that companies voluntarily subscribe to. We will monitor it as an industry. No reputable insurer will want to be outperformed in this area by its competitors, and that should spur companies to get on with it."

Jacci Taylor, claims and customer service director for Groupama, agrees. "From the customer's perspective, it is compulsory to have insurance, and it is something that they love to hate. It has been recognised for years that complaints handling has not been good, but as customers get more demanding, standards must rise. The Code gives policyholders a level playing field."

The FSA is also throwing the spotlight on complaints. In December 2000 it published its final rules on complaints handling. It also launched the new Financial Ombudsman Service, where, as part of the regulatory reform under the Financial Services and Markets Act (FSMA), the eight existing complaints handling and ombudsman schemes will be brought together to form the new service.

The existing schemes are: The Personal Investment Authority Ombudsman Bureau; The Insurance Ombudsman Bureau; The Office of Banking Ombudsman; The Office of Building Societies Ombudsman; The Office of the Investment Ombudsman: The SFA Complaints Bureau; The FSA Complaints Unit and The Personal Insurance Arbitration Service.

Standards should improve
The FSA say that the draft rules follow from extensive consultation and have generally been well received, with no need for any major policy changes. However some of the rules have been amended to clarify their meaning, and further guidance has been added.

Director of customer relations at the FSA, Christine Farnish, says: "These rules are a key element of the regulatory framework to help financial services customers to get their problems dealt with quickly and effectively. Standards of complaint handling should improve. Where problems persist and consumers remain dissatisfied, the Financial Ombudsman Service will be available."

The key requirements in the rules on complaint handling procedures are:

  • that firms must have in place and operate appropriate and effective internal complaint handling procedures, and that consumers are made aware of these procedures
  • that firms must aim to resolve complaints within eight weeks, and must notify complainants of their right to go to the Financial Ombudsman Service if they remain dissatisfied.
  • that firms must report information about their complaints handling to the FSA twice yearly

    The rule on twice yearly reporting has caused some unrest among insurers and some are wary of the extra administration it will bring. Rule of Allianz Cornhill comments: "I think the reporting is unnecessary, because we believe that the procedures and processes that we have in place already work. I don't think this is the right way to do it.

    "It is puzzling that complaints have fallen under the spotlight as we don't detect any higher level of complaints recently. But I supose with two new regulatory bodies the inevitability is that they will focus on this and customer service and that surely can only be a good thing."

    The General Insurance Claims Code
    What does the code do? It sets out the standards of service you can expect when you make a claim. It applies if the policy was issued by a member of the ABI.

    General principles are:
    At all stages you can expect that insurance companies will:

  • Respond promptly, explain how they will handle your claim and tell you what you need to do
  • Give you reasonable guidance to help you to make a claim under the policy
  • Consider and handle your claim fairly and promptly and tell you how your claim is progressing
  • Settle your claim promptly, once they have agreed to do so and
  • Handle complaints fairly and promptly
  • When you first make a claim, you can expect a response on the phone or in writing within five working days; an explanation of whether your claim is normally covered by the policy and an explanation of what should happen. If you are complaining against someone else's insurance you can expect to be told within ten working days what information and evidence they need to consider
  • When processing your claim you can expect: a letter within ten working days; explanations of why other people will be involved
  • When settling your claim you can expect an explanation of how it is usually settled; payments within ten days of your agreeing; repair or replacement within ten working days and an explanation of why the amount has been offered or has been rejected
  • When making a complaint you can expect insurance companies to: acknowledge it promptly, explain how they will handle your complaint and tell you what you need to do; consider and handle your complaint fairly and promptly and tell you how your complaint is progressing; send you a copy of their complaints procedure; acknowledge the complaint within five working days; investigate complaints made in writing independently at a senior level within the insurance company; give a final response in writing within 40 days and tell you that if you are not satisfied, you can refer your complaint to an independent disputes settlement organisation that will sort out the problem.