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Speech to the Worshipful Company of Insurers

Walter Merricks, chief ombudsman

4 June 2003

Master, Warden, Ladies and Gentlemen

The Financial Ombudsman Service that I have the honour to lead can trace its origins to the creation - 22 years ago - of the Insurance Ombudsman Bureau (IOB). That original scheme, an inspired initiative by members of the insurance industry, in collaboration with the consumer movement, formed the model for the scheme now in place, endorsed by Parliament, that covers most aspects of financial services.

Over the years, members of the Worshipful Company of Insurers have played important roles in the IOB, James Haswell of course, the first ombudsman, and others whom I'm pleased to see today: Past Master Tom Roberts, a distinguished chairman of the IOB board; and Junior Warden Tony Lancaster, also a member of the Board.

Now, as the Financial Ombudsman Service, we embrace complaints about a much wider sphere of activities. In the last financial year (the period to the end of March 2003), a total of 62,000 complaints were referred to our case-handling teams - 44% more than in the previous year. Complaints about insurance - either life or general, form the majority of our work, about 56% of it. We get around twice as many complaints about life insurance as we do about general insurance. Complaints about mortgage endowments form around 40% of our business. Dealing with workload of this dimension remains a major challenge for us - our staff, including 18 ombudsmen, now number nearly 600.

Later this month the Financial Services Authority (FSA) will report the outcome of its consultation on general insurance regulation. All insurers (including Lloyds) are, of course, already participants in our scheme but the FSA consultation proposed that all insurance intermediary firms should also participate - a number the FSA currently estimates at around 40,000. We recognise that some intermediaries have been apprehensive, particularly about the costs involved in joining the ombudsman scheme, but others in the sector support the proposals. The FSA has already decided that all mortgage intermediaries should participate, and it is obviously possible that it will reach a similar decision in relation to the insurance sector.

We already consult trade bodies annually on our budget and plan for the year. We are committed to ensuring that our costing structure should be proportionate and appropriate to the very large number of small businesses that might be joining us. We would want to consult widely, informally and formally, with members of the industry - both intermediary and insurer firms, as well as trade bodies, and those representing the small business sector more generally. Insurance brokers, as many here will know, are ably represented on the FSA's Small Business Practitioner Panel by Simon Bolam - a member of this company. Since April this year our doors have been open to those intermediary firms who have wanted to join our scheme voluntarily. As well as providing these firms with useful experience in getting used to what being in an ombudsman scheme is like, this gives us an indication of the kinds of disputes that might be coming to us, so we too can adjust.

For a long time there has been widespread agreement on the need for a comprehensive industry-wide body, covering both brokers and insurers, to underpin consumer confidence more effectively. We had high hopes that the General Insurance Standards Council could bring this about, but that was not to be. Now, however, there is a real prospect of a single avenue for unresolved personal lines disputes.

And surely this would benefit consumers. I have a file on my desk at the moment where the insurer has repudiated liability, effectively blaming the broker for having set up an inappropriate policy. The broker is declining to cooperate with the insurer. But the policyholder has paid premiums in good faith to cover the risks. What impression does he now have of the industry?

So if we are given the chance, we will do our best to play our part in helping to buttress the trust that consumers ought to be able to have in this industry, whether they are dealing with a broker or an insurer - in what should be a seamless chain in the business of providing protection to members of the public.

And that is an objective that I know that all members of this company would also wish to support.

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