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annual review 2013/2014

1 April 2013 to 31 March 2014

how we dealt with the complaints

total number of cases we resolved

year ended
31 March
cases resolved
2014 518,778
2013 223,229
2012 222,333
2011 164,899
2010 166,321
2009 113,949
2008 99,699
2007 111,673
2006 119,432
2005 90,908
2004 76,704

During the year we resolved over half a million complaints. This is twice the number we resolved during the previous year - and is by far the highest number of complaints we have settled in any year since we were set up in 2000.

how we resolved the cases

The approach we take to resolving complaints is largely determined by the individual facts of each case - and by the level of formality needed.

We were set up to resolve complaints informally. So we aim to get both sides to agree at an early stage to the views or informal settlements that our adjudicators suggest.

But more complex or sensitive disputes often require detailed investigations and lengthy reviews. This can include an appeal to one of our panel of 234 ombudsmen for a final decision - as the last stage of our process.

cases settled by our adjudicators

year ended
31 March
cases settled
2014 487,749
2013 198,897
2012 201,793
2011 147,434
2010 155,591
2009 105,275
2008 91,739
2007 104,831

cases appealed to an ombudsman for a final decision

year ended
31 March
cases appealed
2014 31,029
2013 24,332
2012 20,540
2011 17,465
2010 10,730
2009 8,674
2008 7,960
2007 6,842

6% of the cases we settled during the year required an ombudsman to make a final decision (11% in the previous year, and 9% in the year before that). This lower proportion reflects the fact that we resolved record volumes of PPI cases without needing an ombudsman’s decision. In fact, during the year only 2% of PPI cases were settled by an ombudsman’s decision. However, we expect to see this figure increase in future years - as PPI complaints become increasingly complex and entrenched.

For complaints involving products other than PPI, the proportion of cases appealed to an ombudsman has been slowly rising over recent years - from 6% in 2006/2007 to the current figure of 18%. This reflects the continuing shift towards more complex disputes - with many businesses increasingly taking a harder-fought and legalistic approach, and consumers becoming more demanding and less willing to concede.

Of the final decisions made by ombudsmen during the year, 24% of requests were made by financial businesses and 76% by consumers (32% and 68% respectively in the previous year).

  %
requests for an ombudsman decision by financial businesses 24
requests for an ombudsman decision by consumers 76

In 89% of final decisions, ombudsmen reached the same basic conclusions as the adjudicators who handled the cases in the earlier stages. This was a very similar proportion to the previous year. Where ombudsmen came to a different conclusion, there was either a finely-balanced judgement call or, more often, new facts came to light at a very late stage.

The 31,029 final decisions made by ombudsmen during the year were spread across the different areas of complaint as follows.

ombudsman decisions by area of complaint %
banking 28.5
payment protection insurance (PPI) 25.5
general insurance (excluding PPI) 17
mortgages 12
investments 8
consumer credit 6
pensions 3

The proportion of cases that involved an appeal to an ombudsman for a final decision varied considerably across product areas.

For example, although 28.5% of all ombudsman decisions related to banking cases, only 17% of the banking complaints we resolved during the year needed a final decision by an ombudsman to settle them. This is shown in the table below. In the other 83% of banking cases, our adjudicators were able to settle the disputes more informally.

% of cases that required an ombudsman decision %
mortgages 28
consumer credit 22
pensions 22
other investments 18
banking 17
general insurance (excluding PPI) 14
payment protection insurance (PPI) 2

During the year we saw a significant increase - from 20% to 28% - in the proportion of mortgage disputes that were referred to an ombudsman for a final decision. This probably reflects the sensitivity and complexity of mortgage problems that can have a direct impact on people’s homes and lives.

The proportion of men and women who asked for a final decision by an ombudsman remained broadly similar - as did the proportion of requests made by consumers from different faith and ethnic groups. There is more information about the diversity of our customers - and their experience of our service - later in this annual review.

publishing ombudsmen’s decisions

Following extensive consultation through 2011 and 2012, we started to publish individual ombudsmen’s decisions - made from April 2013 onwards - on our website. The consumers involved in the complaints are anonymised so they can’t be identified.

During the year we published 22,968 decisions on our website. This figure differs from the number of decisions that our ombudsmen actually made during the year, because we allow a period of time for the two sides to get the decision in writing first before it’s published.

the backgrounds of the ombudsmen

  %
legal 37
regulatory and government 28
financial services 13
other 22

By law, our board of non-executive directors is required to appoint ombudsmen who have the appropriate qualifications and experience to make decisions in complaints. For someone to be appointed as an ombudsman, the board must be satisfied that they have the depth of experience necessary to make important decisions involving people’s lives, livelihoods and reputations.

Our ombudsmen come from a wide range of backgrounds - and their names and brief career histories are published on our website. Each ombudsman specialises in a particular area of financial complaint.

hearings

As part of our work resolving individual complaints, our rules allow us to hold hearings (face-to-face meetings) in public or private. We do this only where an ombudsman believes a case can’t be fairly decided on the basis of the factual material that the two sides have already provided.

If we are asked for a hearing by either a consumer or a business, we consider carefully what value it will add. We don’t believe that hearings should be held just to allow either side to confront the other in person. And neither side is given a private meeting with the ombudsman who will decide their case.

In most cases ombudsmen are unlikely to consider that a hearing would add anything to their understanding of a complaint - and they agree to only around 10% of requests to hold hearings.

how we record the outcome of cases we resolve

We record the outcome of a consumer’s complaint as “upheld”in cases where:

  • The financial business told the consumer in its final response that it had done nothing wrong - but after the complaint was referred to us, we decided (or the business belatedly accepted) that it had done something wrong after all.
    or
  • The financial business’s final response offered the consumer inadequate compensation - but after the complaint was referred to us, we required the business (or it belatedly agreed) to increase its offer to an appropriate level.

We record the outcome of a complaint as “not upheld” in cases where:

  • The financial business had done nothing wrong.
    or
  • The financial business had done something wrong, but had already offered the consumer appropriate redress (before the complaint was referred to us).

% of complaints we upheld

insurance complaints

insurance complaints 2011 2012 2013 2014
payment protection insurance (PPI) 66% 82% 65% 65%
motor insurance 45% 49% 47% 38%
buildings insurance 42% 50% 48% 44%
contents insurance 41% 52% 40% 39%
travel insurance 42% 52% 48% 53%
health insurance 43% 40% 29% 31%

banking and credit complaints

banking and credit complaints 2011 2012 2013 2014
current accounts 28% 31% 34% 40%
credit cards 61% 54% 33% 30%
mortgages 37% 28% 26% 30%
unsecured loans 43% 37% 34% 35%
consumer credit 47% 51% 50% 48%
savings accounts 42% 44% 42% 41%
other banking services 43% 41% 42% 39%

investment and pension complaints

investment complaints 2011 2012 2013 2014
mortgage endowments 31% 28% 25% 28%
whole-of-life policies and savings endowments 32% 30% 23% 21%
investment bonds 60% 51% 36% 37%
pensions 38% 38% 34% 34%
stockbroking and portfolio management 66% 57% 49% 51%

year ended 31 March

We found in the consumer’s favour in 58% of the complaints we resolved during the year - compared with 49% of complaints in the previous year and 64% in the year before that. This largely reflects the fact that we resolved such a large number of PPI complaints during the year - and we have been finding in the consumer’s favour in a relatively high proportion of these cases.

For the complaints involving products other than PPI, our overall uphold rate was 37%.

Our uphold rate varied across complaints involving different financial products. For example, during the year we upheld:

  • 77.5% of cases involving “packaged” bank accounts.
  • 28% of complaints about mortgage endowments.

complaints data about named businesses

Since September 2009 we have been publishing complaints data on our website every six months about the businesses involved in the complaints referred to us. The data shows the number of new complaints - and the proportion of complaints we upheld in favour of consumers - for named businesses that have 30 or more new cases and 30 or more resolved cases in each six-month period. The complaints data shows that:

  • Around 200 businesses (out of 80,000 covered by the ombudsman service) together account for 95% of our complaints workload.
  • The number of complaints relating to each individual business ranges from 31 to around 40,000.
  • The proportion of cases we uphold in favour of the consumer varies substantially from business to business - between 2% and 94%.

putting things right

Where we find in a consumer’s favour, we must decide how best to put things right - taking into account the individual circumstances of the case. There are various ways we can do this including:

  • Telling the business to pay redress - to put the consumer in the position they would now be in if the business hadn’t got it wrong in the first place.
  • Telling the business to compensate the consumer for the trouble they have been put to - or for the upset the business has caused. We did this in 24,060 cases (9% of the cases we upheld during the year). In these cases the amounts of compensation were generally between £150 and £500.
  • Telling the business to do something (or not do something) to put right what’s gone wrong. This can range from correcting credit references to paying a previously-rejected insurance claim.
  • Telling the business to apologise.

Where we don’t uphold a complaint in favour of a consumer, we aim to give them a clear explanation - from an entirely impartial standpoint - of why we believe the business has done nothing wrong (or has already offered appropriate redress).

how ombudsmen told businesses to put things right

year ended 31 March %
telling the business to take actions to put things right that don't have a direct cash value (for example, correcting a credit reference) 31
redress up to £1,000 19.5
£1,001 to £25,000 19
£25,001 to £75,000 2.5
£75,001 to £150,000 * 1.5
more than £150,000 * 0.5
telling the business the basis or formula on which they must pay compensation (for example, where specialist calculations need to be carried out) 26

* The ombudsman can tell a business to pay compensation of up to £150,000 (£100,000 for complaints we received before 1 January 2012) - and can recommend that the business pay compensation in excess of this amount.

The figures in this table don’t include any additional amounts that we might tell a business to pay - to compensate a consumer for any trouble they have been put to or upset they’ve been caused.

We continue to see many entrenched disputes that could have been avoided if there had been better communication between the financial business and the customer. Too many problems stem from simple misunderstandings that should have been cleared up at the outset.

We know that sometimes consumers might talk about their problems in an unfocused way - that can make them seem unreasonable to the business they complain to. But we also see some businesses responding to customer concerns unhelpfully and defensively - aggravating problems that a clear, helpful and sympathetic explanation might have resolved.

Just because we don’t uphold a complaint on its merits does not mean that the consumer might not feel upset and let down by the way the business has treated them. Similarly, a consumer’s failure to present a reasoned argument does not automatically mean that a case has no merit - or that the complaint should be categorised as “frivolous and vexatious”.

Of the 518,778 complaints we settled during the year, we decided in 30,419 cases (6% of the total) that it would be unfair in the circumstances to charge the business involved a case fee. The vast majority of these cases involved complaints about PPI brought by claims managers - where our enquiries established that the consumer, though understandably concerned, had not in fact been sold a PPI policy.

timeliness

the time it took us to resolve cases

year ended 31 March resolved within 3 months resolved within 6 months resolved within 9 months resolved within 12 months
2014
excluding PPI complaints
44% 71% 84% 90%
2014
all cases
25% 48% 67% 78%
2013
excluding PPI complaints
43% 73% 84% 89%
2013
all cases
30% 58% 72% 81%

We are disappointed that we have not been able to settle all cases as quickly as we - and our customers - would like. During the year we have geared up our resources significantly to make inroads into the large stock of PPI cases that have built up. This will inevitably mean we will be settling greater numbers of cases that have been with us for some time - and this will be reflected in our timeliness statistics.

Meanwhile, we continue to track how consumers feel about having to wait - and we have developed a range of different ways of keeping them up-to-date on what to expect. We explain why customer satisfaction with our timeliness has in fact improved during the year later in this annual review. This tells us how important it is to manage people’s expectations in these difficult circumstances.

PPI cases awaiting resolution at 31 March 2014 %
waiting less than six months 32
between six months and a year 33
between a year and two years 31
over two years 4

Wherever possible we have tried to ensure that the delays caused by the volumes of PPI cases do not adversely affect our handling of cases involving other financial products.

Across banking-related cases, for example, we have been able to settle 56% of cases involving current accounts within three months and 81% within six months. And we resolved 51% of payday loan complaints within three months and 80% within six months.

% of cases resolved within three months %
credit cards 58
current accounts 56
mortgages 52
payday loans 51
consumer credit 46
investments and pensions 38
motor insurance 36
PPI 19

Reducing the time it takes to resolve banking cases has continued to be a major priority for us during the year. Proportionally fewer businesses tend to be responsible for a high volume of cases in this area - so working closely with those businesses to smooth out the complaints process has a significant impact on the length of time people have to wait for their problem to be resolved.

We also believe it makes sense to try and match the speed of resolution with the speed of many of the transactions involved. For example, we worked closely with banks to deal quickly and effectively with complaints from consumers who found themselves unable to use their bank accounts normally following IT glitches during the year.

Many businesses have welcomed the opportunity to cooperate with us - to help improve things for their customers. Disappointingly, others continue to take an overly legalistic approach to handling complaints.

We have also worked closely with Citizens Advice to prioritise and streamline complaints involving payday loans. This is reflected in the fact that we resolved more than half of these complaints within three months.

During the year we identified and prioritised 8,000 cases where financial hardship was a significant issue - a similar figure to the previous year. Around half of these cases involved mortgages. Many others involved current accounts and unsecured loans. We also prioritised cases where a consumer’s health meant they needed their complaint resolving particularly quickly.

Of course, prioritising cases like these inevitably means that other complaints can’t be moved forward as quickly as we would otherwise like.

knowledge and expertise

Our adjudicators and ombudsmen need the right knowledge and expertise to do their work to the highest standards. As part of our commitment to this, during the year we have:

  • Increased the number of ombudsmen by 50% - from 156 to 234.
  • Re-thought our approach to “knowledge management” to make sure all our people have the insight and know-how they need.
  • Launched a range of initiatives to help make sure we communicate clearly with our customers - particularly about the way we work and the decisions we have made.
  • Hosted fortnightly lunchtime workshops on a wide range of topics - from dealing sensitively with consumers who have Parkinson’s disease to “compensation for distress”, and from “packaged” bank accounts to cases involving consumers who have died. We have also continued to run our well-attended executive question times.
  • Continued to offer our development programme for our managers - with each receiving an average of five days of training during the year.
  • Digitised our staff newsletters to bring knowledge sharing - which can sound rather theoretical - to life. And we have made more use of audio and video resources to support our more traditional ways of communicating across the organisation.
  • Gathered ideas and suggestions from our staff about how we can improve what we do - making the best suggestions happen.
  • Provided our people with the skills to deal confidently and sensitively with an increasingly diverse range of customers, including training on disability issues.

taking pride in our work

Our customers trust us to provide a high quality service. This means that in every case we handle, we should be able to show we have:

  • Got the basics right - obvious but important things like getting personal details correct and responding appropriately to someone’s communication needs.
  • Made the decision in the right way - getting to the heart of the issue and applying a consistent approach.
  • Treated customers well - so that in each case the consumer and the business are satisfied with the level of service we have provided.

Maintaining high standards isn’t all about processes and box-ticking. Everybody at the ombudsman service is responsible for taking pride in their work and for the professional service we provide. We involve everyone in talking and thinking about the impact we have on our customers - and how we can improve what we do.

To maintain our high standards, our work during the year has included:

  • Reporting any case-specific feedback from customers directly to the individual adjudicator or ombudsman involved - and to their manager.
  • Bringing our senior leaders together to discuss quality and professionalism across the service. This has helped them talk consistently to their teams about the standards we expect - and how to meet them.
  • Involving our entire senior management team and board members in an assessment of real cases that we’ve dealt with - asking questions and challenging our assumptions. This involved looking in detail at our correspondence, as well as listening to recorded phone calls between our staff and our customers.

asking for our customers’ views

We carry out extensive stakeholder and customer research - to help give us a deeper understanding of what our customers think and feel, how they rate the service we provide, and where we could do things better. During the year this programme included:

  • Running monthly online surveys and six-monthly postal surveys to record and measure how consumers whose complaints we have handled rate aspects of the service we provided.
  • Providing an automated feedback option at the end of phone calls - enabling consumers to give instant ratings on various aspects of the quality of our service.
  • Carrying out research to monitor the views of the businesses we cover - smaller businesses and larger ones alike - using both online and postal surveys.
  • Commissioning research among MPs to get their views on our work in relation to their constituents.
  • Monitoring general consumer awareness of the ombudsman service to help with our work on accessibility - ensuring that everyone who needs to contact us knows how to find us.
  • Running a survey for our website users to find out more about who they are and what they are looking for on our website.

Results and feedback from our research are shown in more detail in the chapters called “who complained to us” and “who the complaints were about”.

handling complaints about our own service

Recognising where we’ve made a mistake, and learning from any shortcomings, is central to offering good customer service. This is why - just like the businesses whose complaints we handle - we have our own formal complaints procedure for people who are unhappy with the level of service we have provided.

We can usually sort out problems as soon as someone tells us they’re unhappy with the standard of service they have received. The prompt involvement of the relevant manager - with an immediate phone call to apologise or explain - means we can resolve many issues without the problem escalating into a formal complaint.

But if we’re not able to sort out matters at this stage, one of our senior managers will look into the problem. This applies to complaints both from consumers and businesses. The process is entirely separate from the usual process that applies if a consumer or business disagrees with our views on the merits of their case - and wants us to re-consider facts and arguments.

During the year we responded to 2,847 complaints about our service - 450 more than the previous year. However, given our increased total workload during the year, the overall proportion of complaints about our service remained the same.

We were able to resolve 63% of these complaints directly within the teams where the problem arose - and 37% of the complaints were settled with the involvement of a senior manager. 2% of the complaints were made by businesses (3% in the previous year) and the others were all from consumers or their representatives.

We agreed that the level of service we had provided was unsatisfactory in 37% of these cases (32% in the previous year). Where this involved paying compensation - in recognition of the inconvenience caused by delays or administrative errors on our part - the average payment was around £100.

Where we are unable to resolve a complaint about our service, it can be referred to an independent assessor - appointed by the board - for a formal independent review of the level of service we have provided. Each year the independent assessor produces an annual report for our board, setting out findings and recommendations made over the year. We publish this report in full on our website.

improving the way we work

We know there is always room for improvement in what we do. We run a wide range of projects and initiatives aimed at improving the quality, consistency and efficiency of the ombudsman service.

Making sure we continue to respond effectively to the unprecedented volumes of PPI cases has given us the opportunity to make significant improvements to the way we work. This has included:

  • Eliminating (as far as possible) reliance on paper files by using document scanning and electronic-file management across our casework operation.
  • Developing our “horizon-scanning” capability so we can quickly identify new issues and respond to changes in the volumes and types of cases referred to us.
  • Enhancing the “live” guidance we give our adjudicators to help them navigate their way through cases.
  • Working with experts in customer service from outside financial services
    - to learn from the best in customer experience and to see how we can improve the “customer journey” for people using our service.

During the year we ran a number of casework experiments to test out different ways of handling complaints. We have listened to what people have been telling us, and based our innovation work on what we have heard.

For example, we knew people wanted to be able to tell us about a complaint online. So we selected visitors to our website at random and asked if they would be interested in taking part in webchats with us.

We tested out different approaches - and monitored the responses we received. We found that in many cases we were able to get enough information about the consumer’s problem, to help them move things forward even at the earliest stage.

We also tested out an online version of our complaint form. Again, we monitored the results of the experiment carefully - and many consumers told us they found it a convenient way of getting the ball rolling.

Unsurprisingly, running these projects confirmed that consumers want to engage with us where and when it suits them - and in a way that puts them firmly in control.

During the year we also used Twitter and other social media sites to interact with people who think they might have a complaint - but who are only in the early stages of articulating it. We have seen how differently people express their problems over social media.

Although it’s still early days, we have found social media to be another useful channel for helping people get their problems sorted out as early as possible - before they escalate into something more serious.

our budget and funding

We are funded by an annual levy paid by the businesses we cover - and by case fees that we charge businesses for settling individual disputes referred to us about them. To help fund the increased resources we needed to handle unprecedented demand for our services, we increased our case fee for 2013/2014 - having kept it at the same level for the previous three years.

However, at the same time we increased the number of free cases for each business from 3 to 25. This meant that during the year, 92% of businesses that had complaints referred to us paid no case fees at all. There is more information about this in the chapter called “who the complaints were about”.

In April 2012 we introduced a supplementary case fee for complaints involving mis-sold PPI. This supplementary fee was chargeable only when businesses had more than 25 of these cases a year, reflecting where the costs were actually incurred in sorting out PPI mis-selling on this scale. Now that we have scaled up our operation sufficiently, from April 2014 businesses no longer pay a supplementary fee for PPI cases.

Our budget is calculated on the basis of workload forecasts that we consult on publicly before the start of each new financial year.

Following public consultation in January and February 2013, the board of the Financial Conduct Authority and our own board approved a budget for the ombudsman service - for the financial year 2013/2014 - that assumed income of £283.6 million and expenditure of £266.9 million, with a unit cost of £690. Our unit cost is calculated by dividing our total costs (before financing charges and any bad debt charge) by the number of cases we resolve.

our unit cost

year ended
31 March
our unit cost (£)
2014 430
2013 720
2012 484
2011 639
2010 555
2009 508
2008 529

The actual final figures for the year showed total income of £336.4 million, expenditure of £223 million, and a unit cost of £430.

Although the number of PPI cases we received during the year yet again exceeded planning assumptions, we had already scaled up our operations in the previous year to deal with the cases coming in. We continued to build that capacity during 2013/2014 by recruiting 1,000 more casehandlers - resulting in a record number of cases resolved and a lower unit cost.

However, as we have said elsewhere in this annual review, we know from our previous experience of handling “mass disputes” that the further we make inroads into our PPI caseload, the more complex and challenging it’s likely to become. This is likely to affect our unit cost in the future.

our income and expenditure

our income and expenditure (summary) actual
year ended 31 March 2014
£ m
actual
year ended
31 March
2013
£ m
actual
year ended
31 March
2012
£ m
income      
annual levy 25.7 20.8 23.6
special levy - - 25.0
group fees 197.2 - -
case fees 82.9 102.6 102.8
supplementary case fees 30.1 39.5 -
other income 0.6 0.5 0.5
bad debt costs - -1.0 -0.4
total income 336.5 162.4 151.5
expenditure      
staff-related costs 188.2 123.4 83.4
other costs 28.4 34.4 21.1
financing charges - - -
depreciation 6.4 3.8 2.2
total expenditure 223.0 161.6 106.7
surplus/(deficit) 113.5 -0.8 44.8

These figures are drawn from our unaudited management accounts and may be subject to change. The directors’ report and audited financial statements will be available separately on our website once approved.